United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2005] UKVAT(Customs) C00199, [2005] UKVAT(Customs) C199

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Hughes DVT Cushions Ltd v Revenue & Customs [2005] UKVAT(Customs) C00199 (2 August 2005)

C00199

CUSTOMS DUTY – Binding Tariff Information – Classification – Compression hosiery – "Veinguard" inflight socks manufactured and imported by Appellant – Whether stockings etc. under heading 61 15 or medical appliances under heading 90 21 – Whether effect derived solely from elasticity – CN heading 61 15, 90 21, Ch 90, Note 1(b)

LONDON TRIBUNAL CENTRE

HUGHES DVT CUSHIONS LTD Appellant

and –

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: ANGUS NICOL (Chairman)

MR A McLOUGHLIN

Sitting in public in London on 13 June 2005

Peter Hughes, director, for the Appellant

Michael Zeffman of the Solicitor's Department of Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

This appeal is against a decision relating to a binding tariff information ("BTI"), with reference GB 198595392, in respect of the classification of the Appellant's "Veinguard" in-flight socks ("the socks") in subheading 61 15 93 of the Combined Nomenclature ("CN"). That subheading covers "Pantyhose, tights, stockings, socks and other hosiery, including stockings for varicose veins and footwear without applied soles, knitted or crocheted". It was the Appellant's case that the proper classification should fall under heading 90 21, which covers "Orthopaedic appliances, including crutches, surgical belts and trusses; splints and other fracture appliances; artificial parts of the body; hearing aids and other appliances which are worn or carried or implanted in the body, to compensate for a defect or disability".

The facts

There was no significant dispute as to the facts, with the exception of the manner in which the DVT socks the subject of the appeal take effect. With that exception, we find the facts to be as set out in the following paragraphs. The exception is the principal issue in this appeal. We derive the facts from the oral evidence given by Mr Peter Hughes, who also conducted the case on behalf of his company, and from the documentary evidence before us.

In February 2002 the Appellant submitted an application for a BTI in respect of the socks in the classification 61 15 93 99 00 of the CN. In the application the socks were described as "Veinguard in-flight socks - compression socks to help avoid deep vein thrombosis on long distance flights. Knee length made of manmade fabric. These socks are for medical use." The Commissioners issued a BTI classifying the socks under subheading 61 15 93 30 00. They informed the Appellant that if it was unhappy about the decision it could ask for a departmental review. The Appellant applied, out of time, in a letter dated 15 July 2003 for a review, stating that the socks should properly be classified under heading 90 21. The letter construed "defect" in that heading as meaning

"that any individual whose blood chemistry is liable to be thicker than normal or whose clotting factors or whose adrenal glands secrete above the normal level of adrenalin are considered to have an inherent physiological defect or disability, as a result of which they will be rendered of substantially higher risk of suffering a potentially fatal deep vein thrombosis as a result of the complication of a pulmonary embolism."

The letter also related that the customs authorities in Australia, South Africa, Norway and the United States treated the socks as medical products and free of customs duty, and said:

"In view of this and the fact that HM Customs state that there is an agreement to apply uniformity to Customs Rules throughout the world I feel that it is the proper course that HM Customs and Excise should re-classify our anti-Deep Vein Thrombosis Flight Socks under Code 9021."

On receipt of that letter the Commissioners agreed to review their decision.

The result of the review was communicated to the Appellant in a letter of 8 August 2003. That letter referred to the judgment of the European Court of Justice in the joint cases Lohmann GmbH and Co, medi Bayreuth Weihermuller rom Voigtmann GmbH & Co v Oberfinanzdirektion Koblenz joint cases C-260/00 to 263/00. In the judgment the Court of Justice drew attention to Note 1(b) to Chapter 90 of the CN, which provides:

"This Chapter does not cover ... (b) supporting belts or other support articles of textile material whose intended effect on the organ to be supported or held derives solely from the elasticity (for example, maternity belts, thoracic support bandages, abdominal support bandages, support for joints or muscles)."

The letter pointed out that under rule 1 of the General Rules for Interpretation of the CN, for legal purposes classification shall be determined according to such chapter notes.

The Commissioners also established that while the United States customs authorities allowed the import of goods such as the socks free of duty, they did in fact classify them under Heading 61 15. They also established that Germany and Sweden had issued BTIs for similar articles under Heading 61 15 93 99 00

In a letter of 15 July 2003 to the Commissioners, Mr Peter Hughes, director of the Appellant, described the socks in the following terms:

"'Inflight' socks are, in reality, mechanical devices designed to apply radial and longitudinal pressure to the feet, ankles and lower leg of the wearer, thereby virtually guaranteeing the wearer avoiding suffering from deep vein thrombosis. In particular our own brand, 'Veinguard', are designed to allow the support to not only apply radially but as previously stated longitudinally, thus avoiding the pooling of blood in the lower limbs and preventing the accumulation that results in oedema....

It is therefore clear that our product should not be classified for Customs purpose as a sock or stocking which it clearly is not, since no-one would utilise it as wearing apparel or as a sock in the accepted sense of the word, nor could it in any circumstances be employed as a fashion statement or garment. It is by any criteria a medical device whose fundamental design principles are to provide support to substantially assist in preventing the development of blood clots as a result of the mechanical effect on the users vascular system, and should therefore be re-classified as a product free of import duty and also should not be subject of a quota license from the Republic of China. In this context the materials employed in its manufacture being 97% nylon and 3% spandex should not influence its classification as a textile since these materials used in other applications may be regarded as a textile, but it is clearly the case that it is the specific purpose for which the resultant product is applied that should be the governing factor."

Mr Hughes then went on to state that Australian customs allowed the product to be imported free of duty, as did the United States and Norway. The letter also referred to the classification definition under Heading 90 21 (see paragraph 1 above) and his definition of "defect" (see paragraph 3 above).

In the review letter itself, the socks are described as "knitted hosiery articles referred to as Compression stockings. They are predominantly made of a knitted polyamide yarn mixed with elastane". The decision is contained in paragraph 14 of the letter, with the following explanation:

"It is not in dispute that the socks are made up articles. They have been made to form a specific article and have been finished at each end so that the article is ready to wear. Legal Note 1 to Chapter 61 states, 'This Chapter applies only to made up knitted or crocheted articles'. Using GIR 1, I am satisfied that the correct heading is 61.15 that fully describes the product under review as knitted stockings and other hosiery including stocking for varicose veins. You have not provided any information on the yarn decitex measurements. I have assumed that the hosiery is constructed from a yarn of 67 decitex or over. Based on this information, using GIR 6 the correct subheading is 61 15.93 that covers stockings of synthetic fibres not mentioned in previous subheadings. The goods are not designed to treat varicose veins, but designed for the prevention of deep vein thrombosis, the correct commodity code is 6115933000."

The Commissioners evidently followed up Mr Hughes's statement that in other countries duty was not charged on the socks. In general, the Commissioners agreed with that, but Mrs Hazel Watts, who gave evidence for Customs, said that she had been able to discover no other country which classified such articles otherwise than under heading 61 15, whether any particular country actually charged duty on them or not. What mattered, they said, was the classification, not the rate of duty. Referring to the application for a BTI by the Appellant, dated 25 February 2002, it was to be observed that the classification envisaged in that application was 61 15 93 99 00. The BTI described the articles as

"Knee length compression inflight knitted black stockings for unisex ribbed at the opening, with embroidered red logo near top. Predominantly made from polyamid mixed with elastane."

The justification for the classification was:

"GIR 1 terms of heading 6115 includes stockings, knitted or crocheted. GIR 6 terms of one-dash subheading other than panty hose and tights. GIR 6 terms of two-dash subheading 6115.93 of synthetic fibres. CN Code 61159330 knee-length stockings (other than stockings for varicose veins). Section XI subheading Note 2(a) refers."

In a letter dated 25 May 2004, Mr Michael Zeffman of the Customs and International Advisory Division, who also appeared for the Commissioners at the hearing, informed the Appellant that with effect from 2007 heading 6115 would expressly include "graduated compression hosiery (for example, stockings for varicose veins)". The Explanatory Note will then say, "For the purposes of subheading 6115.10 'graduated compression hosiery' means hosiery in which the compression is greatest at the ankle and reduces gradually along its length up the leg so that blood flow is encouraged." The letter continued:

"I anticipate that your first observation will be that if these amendments to the Combined Nomenclature and their Explanatory Notes do not come into effect until 2007 how do they affect my current appeal before the Tribunal? You will see in paragraph 1 of page 4 of the enclosed papers (Observations of the Harmonised System Review Sub-Committee dated 28 September 2003) that the inclusion of a reference to compression hosiery was not intended to broaden the scope of the heading and would not entail any transfer of goods. In other words, the amendment is meant to do no more than clarify what is current law and practice."

In reply to that letter, the Appellant wrote again on 29 September 2004 suggesting a review together with the Commissioners, of the technical merits of the Inflight Socks which, he said,

"Incorporate two helix elements to provide not only radial support but also vary the radial support to accommodate leg movement and the flexing of the ankles and knees."

He said that the description of the articles as socks or hosiery was misleading, and that they never were nor intended to be socks or hosiery, and he referred to the definitions of those two words in a dictionary (unspecified). He stated that "Inflight socks, so called, are indeed mechanical devices and without the inherent mechanical effect exerted on the wearer's legs they would be totally ineffective." Referring to Tariff Code 9021, which includes:

"Orthopaedic appliances, including crutches, surgical belts and trusses, splints and other fracture appliances, artificial parts of the body, hearing aids and (other appliances which are worn or carried), or implanted in the body to compensate for defect of disability."

Mr Hughes said,

"The words starting 'other appliances which are worn or carried' in my submission specifically cover, among other things, Inflight socks which it is admitted are worn. In reference to the final section of this paragraph, the words 'to compensate" shall again in my submission specifically refer to the defect in the human body which renders a percentage of the human race with a multi-faceted defects whereby the defects referred a percentage of the population to have a substantially higher blood clotting factor."

The letter went on to contend that the definition in heading 6115 must be defective, and should therefore be amended, if the Appellant's product fell within it. It enclosed two press cuttings, from the Daily Telegraph and The Independent, which extol the virtues and benefits of wearing compression stockings while on long flights, with particular reference to those produced by the Appellant.

Mr Hughes gave evidence about the nature of the socks and their function, and also produced a pair of them for our inspection. He said that the Commissioners had basically misunderstood how the socks worked; they did not, he said, rely solely on elasticity. He said that every second strand in the textile was made of a heavier material, and therefore when the wearer moved his legs there was an expansion and contraction within the body of the sock. For that reason, it constituted an appliance and not a graduated compression sock and did not rely only on elasticity (Note 1(b)). There was, he said, a profound difference. Also in normal compression stockings the elasticity may deteriorate due to washing, temperature change, and wear. The Appellant's sock did not rely upon the same sort of elasticity, and had a far longer life. It will expand or contract upon any point at which a problem may arise. Mr Hughes said that he had carried out deep research into deep vein thrombosis before designing the sock. He mentioned that the original application for a BTI said that the classification should be under heading 61 15 because that was the advice which he had received from Customs.

The definition in the revised heading 61 15 shewed that that was not the correct classification for the sock. These socks are not suitable for varicose veins. The graduated hosiery definition can, but does not necessarily, apply to this product. If the sock is too loose it is useless; if too tight it can encourage the onset of a DVT. He said that the Appellant's sock is considerably more effective than the other ones. The elastication at the top was very light, hardly more than in the body of the sock. Referring to paragraph 10 of the review letter, Mr Hughes said that the sock was designed to support the leg not only radially but also longitudinally, which avoided the pooling of blood in the lower limbs and prevented the accumulation which could result in œdema. The movement of the garment as the leg moved was in all directions, not merely up and down or in and out. Mr Hughes referred to and stressed the paragraph of his letter of 15 July 2003 cited in paragraph 6 above. He agreed that the product did rely upon elasticity to some degree, but not solely. If, for instance, the wearer moved in a particular way, such as tucking his feet under him, a normal sock would tighten up. The Appellant's would not. The compression was not necessarily greater at the ankle. If the wearer's feet were tucked under there would probably be more assistance from the sock at the calf rather than the ankle. It was graduated compression, but not in the normal use of that expression.

The Appellant's contentions

Mr Hughes relied upon the facts as presented to the Tribunal, and in particular his own description of the sock. These facts, he contended, shewed that heading 61 15 was the wrong heading for this product, and it should be classified under heading 90 21. He also relied upon the physical appearance and properties of the sock, as demonstrated by the sample which he handed up.

The Commissioners' contentions

Mr Michael Zeffman, for the Commissioners, provided us with a skeleton argument. He said that the Commissioners' case was that the correct tariff classification was under heading 61 15, and not 90 21 which effectively applies to medical appliances, which the socks are not. He relied upon the HSENs for heading 90 as shewing that the term "appliance" includes such things as speech aids, pacemakers, and electronic aids for the blind. The CNENs state that appliances are things which compensate for a defect or disability, and include items used for cardiac patients. He referred us also to the New Shorter OED definition of appliance as a "thing applied as a means to an end, a device, a utensil, an apparatus". But, Mr Zeffman said, even if the socks could properly be described as appliances worn to compensate for a defect, they would be excluded from Chapter 90 by Note 1(b), which excludes "articles of textile material whose intended effect on the organ to be supported or held derives solely from their elasticity." It was the Appellant's case that the graduated compression of the socks which compensate for a defect; but that the compression was provided solely by the elasticity.

It was part of the Appellant's case, Mr Zeffman said, that in other countries the socks were not charged to duty. But research had shewn that there were varying rates of duty in different countries, and that some countries did not charge duty notwithstanding that they classified the socks under heading 61 15; the U.S.A. had moved compression hosiery for orthopaedic purposes from heading 90 21 to heading 61 15. The research had also shewn that no country classified the socks under any heading other than 61 15. In Masterspare Ltd v Customs and Excise Commissioners (1996) (Decision No C21), the Tribunal referred also to the dictionary definition of "orthopaedic": "pertaining to or concerned with the treatment of disorders of the bones and joints, and the correction of deformities in general." That definition shewed that the socks were not orthopaedic.

Conclusions

The issue is whether the socks should properly be classified under heading 61 15, as contended by the Commissioners, or whether they should be included under heading 90 21 as urged by the Appellant. The Appellant was adamant that the term "socks" was a misnomer, and gave rise to a misunderstanding of the purpose and operation of the socks (which we continue to call them simply for ease of reference). The Appellant's case is that they are medical appliances, and properly fall into heading 90 21 as "appliances which are worn ... to compensate for a defect or disability". The proper meaning of "defect" in this context, the Appellant argues is that referred to in paragraph 3 above. If we have understood him correctly, Mr Hughes was arguing that someone whose blood chemistry or whose adrenal glands are as there described has a defect within the meaning of heading 90 21, and the socks are worn to compensate for that defect. Mr Zeffman contended that the instances of appliances given in the tariff classification and in the HSENs and CNENs are not of the same sort as the socks, and that the dictionary definition of appliance is not apt to describe the socks. We consider these comparisons and the dictionary definition with some caution, since the lists in the classification and the Explanatory Notes are not exhaustive, and words can be and frequently are misused, for technical purposes, in ways which do not always conform to the definition. However, it does not appear to us that the socks fall into the same category as the orthopaedic appliances which are the subject-matter of heading 90 21.

Mr Zeffman also argued that even if the socks were medical appliances and fitted within the list of articles in heading 90 21, that Note 1(b) or the Chapter Notes to Chapter 90 would exclude them from that chapter, on the ground that they were "support articles of textile material whose intended effect on the organ to be supported or held derives solely from their elasticity." We have listened with care to Mr Hughes's description of the socks and their function, and we have examined a pair of them. Mr Hughes told us repeatedly that the differences between the Appellant's socks and any others designed for a similar purpose were that the compression exerted by the Appellant's socks was not only radial but also longitudinal, and that the pressure came from all directions according as the leg moved. He agreed that the garment did rely upon elasticity to a degree, but not solely. The sample pair of socks shewn to us appeared, on being taken out of their packet, to be very small, almost the size of a child's socks. They were able to stretch considerably, and when put on would, of course, stretch sufficiently to cover the limb of the wearer. Therefore, when at rest, the sock was already exerting a degree of pressure, or compression, on the leg. As the leg moved, that pressure would vary as to amount, direction and place. That, as we understood it, was the purpose of the garment. But it was impossible to see that it could exert this multidirectional pressure otherwise than by means of the elasticity of the sock. Nor was any other attribute suggested which, in addition to elasticity, carried out the purpose of the sock.

For the above reasons, we find that the socks were not appliances for the purposes of Chapter 90, and therefore do not fall within that chapter. But if we are wrong about that, and they are in reality appliances for that purpose, we find on the evidence we have seen and heard that the intended effect of the socks on the legs which are to be supported or held does indeed derive from the elasticity of the socks and from nothing else.

For the above reasons, this appeal must be dismissed. At the end of the hearing, each party stated its non-intention of applying for costs. Accordingly we make no order as to costs.

ANGUS NICOL

CHAIRMAN

RELEASED: 2 August 2005

LON/03/7038