United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2005] UKVAT(Customs) C204, [2005] UKVAT(Customs) C00204

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Ge Ion Track Ltd v Her Majesty's Revenue and Customs [2005] UKVAT(Customs) C00204 (27 October 2005)

CO00204

CUSTOMS DUTY – mass spectrometer using beta radiation for ionisation – whether categorised under 90 22 (Apparatus based on the use of X-rays or alpha, beta or gamma radiations) or 90 27 (Instruments and apparatus for physical or chemical analysis) – both – categorisation resolved in favour of 90 27 by GIR 3(a) – appeal allowed

LONDON TRIBUNAL CENTRE

GE ION TRACK LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

SHAHWAR SADEQUE M.Phil M.Sc

Sitting in public in London on 27 September 2005

Philip Challen, Head of Customs Compliance, GE International Inc, for the Appellant

Owain Thomas, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

This is an appeal by GE Ion Track Limited against a decision contained in a review letter dated 18 February 2005 confirming the customs categorisation of three products, Entryscan, VaporTracer and Itemiser (together "the Products") in binding tariff informations issued on 14 July 2005 as heading 90 22 29 00 00. The Appellant was represented by Mr Philip Challen, and the Respondents by Mr Owain Thomas.

The products are designed for the detection of explosives and narcotics, for example at airports. Entryscan looks like the type of machine one walks through at airport security. VaporTracer is a hand-held device and Itemiser is a desktop device. All three Products take a sample of air and analyse it using the Appellant's patented Ion Trap Mobility Spectrometer ("ITMS") technology, which is a type of Ion Mobility Spectrometry. These are described in the Appellant's brochure as follows:

"IMS separates ionised molecular compounds on the basis their transit times (sometimes called 'time of flight' or 'drift time') when subjected to an electric field in a tube. This time is then compared to stored transit times of known compounds making it possible to distinguish the target material (explosives or narcotics) from other molecules. …[G]aseous samples enter an ionisation chamber where an ionisation source emits low-energy beta particles resulting in ion formation in the gaseous phase. A gating mechanism allows the ions of the correct polarity to pass through the shutter grid and enter the ion drift region where an applied electric field mobilizes the ions….The rate at which these ions traverse the ion drift region is inversely proportional to the size of the ion. This correlation allows for the identification of the analyte of interest…."

ITMS is described in the brochure as follows:

"ITMS, like IMS, separates ionised vapours and then measures the mobility of the ions in an electric field. In the typical implementation of ITMS, the gaseous sample passes through a semi-permeable membrane prior to ionisation. Also like IMS, the gaseous samples then enter an ionisation chamber where an ionisation source emits low-energy beta particles resulting in ion formation in the gaseous phase. Unlike IMS, however, the ionisation in ITMS is allowed to reach equilibrium in a field-free region and then pulsed into the drift tube where an electric field accelerates the ions to the collector. Note that in the ITMS detector, the shutter grid does not exist, resulting in a much greater portion of the ions entering the drift tube."

We heard expert evidence in the form of three reports and oral evidence from Mr Bevan John Clues, Chartered Electical Engineer and a Member of the Institution of Electrical Engineers, who also commented on the Appellant's expert's report by Mr Ching Wu, who did not give evidence, but there was little disagreement between them. We make the following findings of fact from his evidence:

(1) Spectroscopy is the study of the interaction between electromagnetic radiation and matter. The Products are mass spectrometers. By way of comparison an optical spectrometer resolves a beam of light into components according to their wavelength ie colour component, whereas a mass spectrometer resolves a beam of positive ions according to their mass/charge ratio, or, if all have a single elementary charge, according to their masses. There are different types of mass spectrometers; the distinguishing feature between them is in the manner in which separation is achieved. Essentially ions of the material being analysed have to be produced.

(2) An ion is an atom with either extra electrons or missing electrons. Thus an ion can be positively or negatively charged. Methods of producing the ions include sparks, heated filament and acceleration by the use of an electrical potential, electric field at a sharp point or edge, electrospray ionisation, radiation source, eg alpha, beta or gamma rays. The Products use beta radiation because it requires zero power consumption, and has long-term stability and universal ionisation ability, which makes it the best choice for portable instruments. The use of beta radiation generally is being replaced by other means, such as electrospray.

(3) The source of beta radiation is an integral and inseparable part of the Products. Beta rays are part of the electromagnetic spectrum, covering radio, infra-red light, visible light, ultra-violet rays, X-rays, gamma rays, beta rays and cosmic rays. Beta rays are streams of very fast electrons with speeds of up to within a few tenths of a per cent of the speed of light.

(4) The use of a drift tube is an established technique for mass spectrometers.

(5) Because the Products are based on an ionisation radiation source and a drift tube and that a beta source has been designed into the Products, in Mr Clues' opinion the Products are "based on" beta radiation.

The possible headings for categorisation of the Products are:

As contended for by Customs:

90 22 - Apparatus based on the use of X-rays or alpha, beta or gamma radiations, whether or not for medical, surgical, dental or veterinary use, including radiography or radiotherapy apparatus, X-ray tubes and other X-ray generators, high tension generators, control panels and desks, screens, examination or treatment tables, chairs and the like.

As contended for by the Appellant:

90 27 - Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes.

The Explanatory Notes to the Harmonised System ("HSEN") to heading 90 22 provides that the heading includes X-ray spectrometry equipment, but does not cover instruments or apparatus which are not designed to incorporate a radioactive source and which merely measure or detect radiation (heading 90 30).

The HSEN to heading 90 27 states that the heading includes:

"…(5) Spectrometers. These instruments are used to measure the wave-lengths of emission and absorption spectra. They consist essentially of an adjustable slit collimator (through which the beam of light to be analysed passes), one or more adjustable prisms, a telescope and a prism table. Some spectrometers (particularly those used for infra-red or ultra-violet rays) are fitted with prisms or with diffraction gratings."

It also provides that "The Heading also excludes:…(e) X-ray, etc, apparatus (heading 90 22)."

In outline Mr Challen, for the Appellant, contends:

(1) Because the Products are spectrometers, heading 90 27, which specifically mentions spectrometers, applies.

(2) The HSEN is not legally binding and cannot exclude items contrary to the wording of the heading. While the definition of spectrometer in the HSEN covers only optical spectrometers (and the same for mass spectrographs), this is accounted for by subheading 9027.30: "spectrometers, spectrophotometers and spectrographs using optical radiations (UV, visible, IR)."

(3) In heading 90 22, for the Products to be "based on the use of…beta radiation," the radiation must be the defining operational characteristic. The Products do not measure, detect or analyse the beta radiation. The defining characteristic is that of a spectrometer. It is incorrect to argue as the Respondent does that because the Products use beta radiation and would not work without the sample being first ionised by beta radiation, that they are based on beta radiation. That approach would lead to the conclusion that they were based on the use of electricity, or of spectrometry.

(4) Accordingly the only heading is 90 27. Alternatively, if 90 22 is also possible, under GIR 3(a) the more specific description is that of spectrometer in 90 27, rather than the wide range of goods in 90 22. Alternatively, GIR 3(c) means that 90 27 applies.

In outline, Mr Thomas, for the Respondents, contends:

(1) The HSEN excludes spectrometers other than optical spectrometers from 90 27. Also the HSEN excludes apparatus falling within 90 22 from heading 90 27.

(2) The Products are within heading 90 22 only as being based on beta radiation. There is no requirement that the apparatus should either measure or detect radiation; such apparatus is within heading 90 30 which includes "instruments and apparatus for measuring or detecting alpha, beta, gamma, X-ray, cosmic or other ionising radiations." Since the use of beta radiation as the ionising source is an integral and essential part of the spectrometer function, the Products are based on the use of beta radiation. The words "based on the use of" are not a reference to the operational characteristics of the apparatus as a matter of language, and by reference to the apparatus included in the heading. For example the defining operational characteristics of a product for delivery of radiotherapy is the function of killing cancer cells. But radiotherapy is not "based on" killing cancer cells, but is based on the use of radiation.

(3) If (contrary to the above) the Products fall within both headings, the more specific one is 90 22 relating to products that are based on the use of radiation, rather than the general one of instruments and apparatus for physical and chemical analysis.

The general rules for the interpretation of the Combined Nomenclature lay down the following principles:

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 headings or notes do not otherwise require, according to the following provisions.

…

When by application of rule 2(b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:

(a) the heading which provides the most specific description shall be preferred to heading providing a more general description….

…

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."

So far as GIR 1 is concerned it is common ground that there are no relevant section or chapter notes.

The BTIs categorised the apparatus under 90 22 (in full 9022290000) stating that the justification was GIR 1, 3a and 6 as well as the text of the headings 9022 and 902229. The review decision came to the same classification but using GIR 1 only, but accepting that there was an argument that 92 27 might apply but GIR 3a would resolve the classification in favour of 90 22.

We consider each of the possible headings in turn.

Heading 90 22

There is no doubt that the Products use beta radiation in order to ionise the molecules. However, what is measured is the speed of movement of the ions, which is not a measurement of radiation. It is also the case that the Product could have been designed to use an alternative source of ionisation not involving beta radiation, and would still be identical in operation. Mr Challen contended that as the use of radiation was subsidiary the Products were not based on the use of radiation. He asked Mr Clues whether he agreed that products that measured radiation or where the radiation was the output, such as radiotherapy apparatus, were more based on radiation than the Products, but Mr Clues declined to make such a comparison. His view was that the Products use beta radiation and would not work if there were no beta radiation. They are totally dependent on radiation, and it was irrelevant to the categorisation of the Products that a similar product could be designed that did not use radiation as the ionising source. In his view the Products were therefore based on the use of radiation.

We agree with his approach. The question is simply whether the Products are based on the use of beta radiation, to which the only answer is that they are. It does not seem to us to matter that, for example, radiotherapy apparatus, which is specifically mentioned in the heading, actually uses the X-rays as its output, whereas the Products use beta radiation as a first step in the process (and might just as well have used some other means of ionisation). We consider that this is the right approach where the tariff has a separate heading of apparatus based on the use of radiation. The issue is simply whether the apparatus uses radiation; there is no stated requirement that its use should be the defining operational characteristic and we do not consider that we should imply this. With regard to Mr Challen's argument that one could just as well say that the Products were based on the use of electricity, if instead there had been a heading for apparatus based on the use of electricity we would have applied exactly the same approach.

Accordingly heading 90 22 is a possible heading for the categorisation of the Product.

Heading 90 27

The Products are clearly instruments for physical or chemical analysis. They are mass spectrometers which analyse ions by comparing their mass which is determined by their transit time when subjected to an electric field. On the face of it, the Products fit this Heading, particularly as spectrometers are specifically included in the list of examples.

Against this is the HSEN, which first, defines spectrometer to mean an optical spectrometer only and secondly, provides that "X-ray, etc, apparatus" is excluded as being in heading 90 22. If one gives effect to these, the Products are not within this heading, with the result that as we have decided that they fall within 90 22 that is the only heading. Mr Challen contends that if one used the HSEN to exclude the Products it has the effect of changing the natural meaning of the headings which goes beyond the permissible use of HSEN as it changes the meaning of the heading. Mr Thomas contends that the HSEN does not alter the scope of the heading; it is consistent with the text of both headings.

In Holz Geenen GmbH, Case C-309/98, at [14] the European Court said:

"It is settled case-law that, in the interests of legal certainty and for ease of verification, the decisive criterion for the classification of goods for customs purposes is in general to be sought in their objective characteristics and properties as defined in the wording of the relevant heading of the CN. The explanatory notes drawn up, as regards the CN, by the Commission and, as regards the HS, by the Customs Cooperation Council (the HSENs), may be an important aid to the interpretation of the scope of the various tariff heading but do not have legally binding force."

Using the HSENs in this way as a non-binding aid to interpretation means that we should adopt them except where they contradict the text of the headings. We therefore consider whether the heading requires the exclusion of non-optical spectrometers. The heading covers the general description of "Instruments and apparatus for physical or chemical analysis" which are followed by examples of polarimeters, refractometers and spectrometers, the first two of which work within optical spectrum, and the third may, or may not, do so. These are followed by gas and smoke analysis apparatus, which may operate within the optical spectrum (such as measurement of absorption of light (including infra-red and ultra-violet light), or a smoke detector using a beam of light or infra-red rays), but may not, such as apparatus measuring the selective absorption of microwave radiations, or the magnetic permeability of gasses, to give examples from the HSEN itself. Other items within the heading include instruments for measuring or checking viscosity, porosity, expansion, surface tension or the like, and for measuring or checking quantities of heat, sound or light, which are not restricted to optical instruments, and microtomes which are not optical instruments.

We consider that the position is unclear. We recognise the force of Mr Thomas' approach supporting the review letter that heading 90 22 might be considered the only heading, which has the advantage of giving effect to the HSEN. On the other hand, we incline to the view that by restricting the reference to spectrometers to optical spectrometers the HSEN goes beyond an explanation of the wording of the heading and there is no reason in principle why mass spectrometers using radiation should not be included within the general words "instruments and apparatus for physical or chemical analysis." The statement in the HSEN that the heading excludes "X-ray, etc, apparatus" may be no more than a pointer that there is a separate heading for such apparatus, or it may be a statement that the heading is not wide enough to include them. If it is the latter, we are doubtful it this is justified by the wording of the heading. On balance, we consider that we should not use the HSEN to exclude the Products from this heading because doing so would be to give legally binding effect to the HSEN contrary to the wording of the heading. Accordingly, we consider heading 90 27 also to be a possible heading.

In order to resolve the dual headings we apply GIR 3(a) that the "heading which provides the most specific description shall be preferred to heading providing a more general description." It is difficult to weigh up the specificity of two headings which are different in nature: heading 90 22 looks at the means by which the apparatus operates regardless of its use ("based on the use of…beta…radiation, whether or not for medical [etc] use"), and heading 90 27 looks at the function it performs ("for physical or chemical analysis"). The existence of this approach makes it likely that items will fall within two headings. The question is not which heading is wider in general, but which heading is a more specific description of the Products. In our view it is a more specific description to say that the apparatus is an instrument for chemical analysis, than to say that it is based on the use of beta radiation because the latter is merely the means by which one part of it operates. Analysis is a description of what the apparatus does as a whole, whereas being based on the use of beta radiation is a description of how only part of it operates, which is not even the part that carries out the analysis, but a necessary preliminary to the analysis by producing the ions which can be analysed. If the apparatus actually measured the beta radiation the question would have been more finely balanced but here the radiation performs a preliminary (but essential) function only. Mr Clues' description of the apparatus as a mass spectrometer is essentially a description that it performs analysis. Accordingly we conclude that the heading providing the more specific description is 90 27.

Within 90 27 are the following sub-headings:

"Other instruments and apparatus using optical radiations (UV, visible, IR)	902750
Other instruments and apparatus:
Electronic:
Ph meters, rH meters and other apparatus for measuring conductivity	902780 11
Apparatus for performing measurements of the physical properties of semiconductor materials or of LCD substrates or associated insulating and conducting layers during the semiconductor wafer production process or the LCD production process	902780 13
Other	902780 17

None of the listed items is applicable and accordingly 90 27 80 17 is the appropriate Combined Nomenclature heading, and the full TARIC heading is 90 27 80 17 00.

We should mention that four other BTIs were shown to us and were commented upon briefly by Mr Clues. Three were mass spectrometers of various types all using radiation, all of which were classified under heading 90 22, and one was not a mass spectrometer and used infra red rays and was classified under heading 90 27. The descriptions were unclear and in two cases were translations. Mr Clues did not give any opinion about whether he agreed with them. We did not find these particularly helpful and do not use them as part of our reasoning.

We therefore allow the appeal. Mr Challen did not ask for costs.

During the hearing the Chairman expressed concern that the review letter relied on a different justification for the categorisation from the BTIs themselves. Mr Thomas promised to give the Tribunal a note on this for which we are grateful. He contended that the two legally operative aspects of the BTI are (i) the classification and (ii) the description. The BTI is binding upon the Commissioners but only in respect of the classification of goods covered unless it ceases to be valid or it is revoked. There is no reference in the legal provisions at issue to a circumstance whereby the BTI will be rendered invalid where the stated reasoning is incorrect but where the classification is nonetheless correct. Thus the BTIs in question are not binding upon the Commissioners as regards the reasoning adopted. Any error in the reasoning which does not affect the classification is of no legal significance as between the Commissioners and the holder. BTIs should be distinguished from Regulations for which the reasoning adopted by the Commission in a given case is an important aspect in determining the scope of the Regulation. For example in Hewlett Packard BV-v- Directeur Général des Douanes et Droits Indirects the ECJ said:

"20. In the interpretation of a classification regulation, in order to determine its scope, account must be taken inter alia of the reasons given, as the Court did in its judgment in Rank Xerox (Case C-67/95 [1997] ECR I-5401, paragraph 26)."

Sony Computer Entertainment Europe Ltd v EC Commission (Case T-243/01) is an example of a defect in the reasoning invalidating a classification Regulation. The Court noted that in adopting a classification regulation it is incumbent on the Commission to state its reasons for the classification "in order to inform persons concerned of the justification for the measure adopted and to enable the Community Court to exercise its powers of review" (paragraph 131). The reason why such a defect in a Regulation renders it invalid flows from its nature as a legislative measure binding in its entirety. The same cannot be said of a BTI which is (i) only binding upon the Commissioners (and the other customs authorities of the Member States) when presented by the holder and not on the holder and (ii) is only binding in respect of the classification given and not as to the reasoning applied.

In view of our decision we do not consider that it is necessary to pursue this issue or to obtain Mr Challen's reply. We merely state that we still find it strange that the review letter, against which the appeal is brought, relies on a different justification from the BTIs, which are binding on the Commissioners (and other customs authorities of the member states), and leave it to be pursued if necessary in another case.

JOHN F. AVERY JONES

CHAIRMAN

RELEASE DATE: 27 October 2005

LON/05/7043