United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2006] UKVAT(Customs) C217, [2006] UKVAT(Customs) C00217

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Epson Telford Ltd v Revenue & Customs [2006] UKVAT(Customs) C00217 (19 May 2006)

CO00217

CUSTOMS DUTY — classification of 2nd and 3rd generation of ink printer cartridges under 8473 (a part of printer) — or under 3215 (as ink) — technology of cartridge in the printing process examined — transfer and storage of information considered — ECJ decision in Turbon (1) distinguished — referral to ECJ not appropriate — appeal allowed

MANCHESTER TRIBUNAL CENTRE

EPSON TELFORD LIMITED Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Elsie Gilliland (Chairman)

Gilian Pratt

Sitting in public in Manchester on 20, 21 and 22 March 2006

Alastair Sutton, counsel, and Jacquelyn MacLennon, solicitor, instructed by White and Case Advocates for the Appellant

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

DECISION

The appeal

The appeal before the tribunal is a consolidated appeal brought by Epson Telford Ltd. (the Appellant) against two decisions of the Commissioners on review in respect of models of Epson ink printer cartridges known as generation 2 (the CSIC 1C5CL05 (colour) and ICIBK05 (black)) and generation 3 (HAVT0461 (black)). The issue is one of tariff classification and what gave rise to the appeal was the withdrawal by the Commissioners from the 2^nd generation products of the Binding Tariff Information decisions (BTIs) which had classified them under the Combined Nomenclature (CN) heading of 8473 3010 00 and their re-classification by the Commissioners under 3215 9080 90 and subsequently the classification of the 3^rd generation cartridges under the same heading of 3215 9080 90. Under CN 8473 3010 00 the customs duty is zero; under CN 3215 9080 90 it is 6.5%.

It was also put to the tribunal by the legal representatives of the Appellant that the case before us was appropriate for a referral from the tribunal to the European Court of Justice. It was acknowledged by counsel that the tribunal has a discretion and does not have to refer. We took argument from both parties on this issue towards the end of the hearing and we have dealt with that point in detail below.

Two experts one called by each party gave evidence and both were closely cross-examined. David Anthony Sykes a chartered electrical engineer whose specialist field is IT peripheral equipment was called by the Appellant and Bevan John Clues a chartered electrical engineer was called by the Commissioners. There were areas where they were in agreement but on the main issue they were far apart. Put briefly the question for decision is whether these 2^nd and 3^rd generation printer cartridges should be classified as parts of the printer as submitted by the Appellant or whether notwithstanding any technological advances from the 1^st generation cartridges they should be classified as ink as contended by the Commissioners.

The relevant tariff classifications for which the parties contend are to be found in Chapters 84 and 32 respectively of the CN. Chapter 84 covers a wide range of machinery and mechanical appliances and "parts thereof". There is no dispute between the parties that the relevant printers into which the ink cartridges in question are inserted and which are then used to produce printed documents are properly classified under CN Code 8471 in Chapter 84 as a data processing machine. Chapter 32 of the CN covers a wide range of items including dyes pigments and inks.

The Appellant claims that the relevant tariff classification for the 2^nd and 3^rd generation ink cartridges is to be found in Chapter 84 under CN code or heading 8473 which is as follows:

"8473. Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of headings 8469 to 8472 …

8473 30. Parts and accessories of heading 8471:

8473 30 10 – Electronic assemblies

8473 30 90 – Other"

The issue as to whether the cartridges in question should be regarded as "accessories" within the heading 8473 was not pursued by the Appellant. If the cartridges are to be classified under 8473 they can only be so classified if they can be regarded as parts within 8473. If the cartridges are to be regarded as parts within 8473 then they are parts which are suitable for use solely or principally with the printers under heading 8471. The evidence is clear that the cartridges before us have been specifically designed for use in particular Epson printers.

The Commissioners rely upon Heading 3215, which so far as is relevant is as follows:

"3215 Printing ink, writing or drawing ink and other inks, whether or not concentrated or solid:

[… Printing ink …]

3215 11 00 Black

3215 19 00 Other

3215 90 Other

3215 90.10 - Writing or drawing ink -

3215 90 80 Other"

The Commissioners under the BTIs now appealed from classified the 2^nd and 3rd generation ink cartridges under 3215 90 80 as "other ink".

The Law

The legal basis for the imposition of a common customs tariff in relation to the importation of goods into the European Community (the EC) is to be found in Article 23 (formerly Article 9) of the EC Treaty. By Article 20 of Council Regulation 2913/92 the Community Customs Code was established. Article 20 provides that the Customs tariff of the EC:

"shall comprise

(a) the combined nomenclature of goods

(b) any other nomenclature which is wholly or partly based on the combined nomenclature or which adds any subdivision to it and which is established by Community provisions governing specific fields with the view to the application of tariff measure relating to trade in goods".

The CN for goods was established by Council Regulation EEC 2658/87 and the common customs tariff referred to in Article 23 (formerly 9) of the Treaty consists of the rates of duty and other charges and tariff measures contained in the CN (or in the Integrated Tariff of the European Communities (the Taric) established in Article 20 (b) above). In the present appeal only the CN is involved and the rates of duty are as specified in the relevant sub-headings of the CN.

The EC is a contracting party to the International Convention on the Harmonised Commodity Description and Coding System (the HS) which requires that the contracting states' tariffs and nomenclatures conform to the HS. The HS is administered by the Customs Co-operation Council (WCO) in Brussels. The WCO produces explanatory notes on the HS and all contracting states use the headings and sub-headings of the HS. The official interpretation of the HS is to be found in 4 volumes of explanatory notes published by the WCO and known as HSENs. Copies of the relevant notes are contained in the bundle before the tribunal. The CN and the HS are in identical terms in relation to the classifications with which we are concerned.

The European Commission has itself drawn up explanatory notes (CNENs) in relation to the CNs and it is well established that when considering the scope of the CN and the HS the relevant CNENs and HSENs may be an important aid to the interpretation of the scope of the various tariff headings although they do not have binding legal force. The European Court in 2000 in Holz Geenan GmbH v Oberfinanzdirektion Munchen (Case C- 309/98 at paragraph 14) has set out the general approach to the interpretation of the CN as follows:

"It is settled case law that, in the interests of legal certainty and for ease of verification, the decisive criteria 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 CN. The explanatory notes drawn up as regards the CN by the Commission [CNENs] and as regards the HS by the Customs Co-operation Council [HSENs] may be an important aid to the interpretation of the scope of the various tariff headings but do not have legally binding force".

It is also established that the European Court may pay regard to the HSENs when considering the scope of the CNs.

In Develop Dr Eisbein GmbH & Co. v Hauptzollamt Stuttgart-West (Case C-35/93 [1995] ECR1 – 2655 it was stated:

"The Court has stated on many occasions the Explanatory Notes to the nomenclature of the Customs Co-operation Council constitute an important means of ensuring the uniform application of the Common Customs Tariff to the customs authorities of the Member States and as such may be considered a valid aid to the interpretation of the tariff. However these notes do not have legally binding force so that, where appropriate, it is necessary to consider whether their content is in accordance with the actual provisions of the Common Customs Tariff and whether they alter the meaning of such provisions…"

The relationship between the CNENs and the HSENs is set out in the foreword to the CNENs published in the Official Journal C256 of 2001 where the following passage appears:

"Although the CNENs refer to HSENs, they do not take the place of the latter which should be regarded as complementary and used in conjunction with them."

It follows in our judgment that it is proper to have regard both to any relevant CNENs and HSENs when considering the scope of the relevant CNs in this case but ultimately it is the terms of the CNs themselves which are decisive.

The General rules for the interpretation of the CN (GRIs)

In addition to the CNENs and HSENs themselves there are also general rules (GRIs) for the interpretation of the CNs. These are set out in section 1 of the CN where it is provided:

"Classification of goods in the [CN] shall be governed by 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

(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented , the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule) presented unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to include mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more that one material or substance shall be according to the principles of rule 3.

When by the 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 headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) mixtures, composite goods consisting 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 appears last in numerical order among those which equally merit consideration."

Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.

In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein:

(a) camera cases, musical instrument cases, gun cases, drawing- instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long- term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character;

(b) subject to the provisions of rule 5 (a), packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use

For legal purposes, the classification of goods in the subheading of a heading shall be determined according to the terms of the 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 requires otherwise."

So far as the interpretation of heading 3215 is concerned, there is an explanatory note which may be of relevance. In relation to heading 3215 for which the Commissioners contend, the relevant HSEN note concludes:

"This heading does not include:

…

(b) Refills for ball point fountain pens comprising the ball point and ink reservoir (heading 96.08). On the other hand mere ink filled cartridges for ordinary fountain pens remain in this heading".

In relation to the interpretation of heading 8473 for which the Appellant contends Section XV1 of Note 2 of the CN provides (so far as is material) "…parts of machines…are to be classified according to the following rules:…

(c) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading…are to be classified with the machines of that kind or in heading…8473 as appropriate…"

Case Law

In Peacock AG v Hauptzollamt Paderborn (Case C – 339/98 [2000] ECR 1-8947) (Peacock) the European Court considered the meaning of "part" in heading 8473. The case concerned the proper classification of network cards designed to be installed in personal computers to enable them to exchange information or data with other computers via a local area network to which they were all connected. The customs authorities at Paderborn in 1995 determined that the network cards should be classified under heading 8517 as electrical apparatus for live telephony or live telegraphy and imposed a customs duty of 7.5% instead of the rates of duty paid under 8473 30 up till then. The German customs claimed back duty. The network cards had been designed solely for automatic information processing machines. They were directly connected to these machines and their function was to supply and accept data in a form which the machines could use. At paragraph 16 of the judgment the European Court said: " Network cards are thus comparable with any other medium whereby an automatic information processing machine accepts or delivers data in the sense that they have no function which they would be capable of performing without the assistance of such a machine". Accordingly the Court held that it was unnecessary to consider whether the network cards could be classified as machines within note 5(B) to Chapter 84 of the CN as they could not in any event be regarded as performing a specific function. The question there was whether the cards should be classified as " units of automatic data-processing machines" under 8471 or under 8473 as "parts or accessories" of units of machines of that type. The Court held that the cards were separate "units" which under note 5(B) were to be regarded as being a part of a complete system if they met three conditions which the Court concluded they did. The Court however rejected the argument that the cards were to be regarded as "parts" within heading 8473 stating: " the word part on the other hand implies a whole for the operation of which the part is essential and this is not so in the case of network cards. In that respect, it appears from the documents before the Court that network cards, which come in the form of slot-in cards, may also take other forms, in particular that of a "standalone unit" (See paragraph 21.) We do not accept the contention of counsel for the Commissioners that the Court was merely drawing an implication rather than establishing a definition nor in our view was that the attitude of the Court in Turbon 1 below.

In Turbon International GmbH v Oberfinanzdirektion Koblenz (Case C – 276/00 [2002] ECR 1-1389) (Turbon 1) the European Court had to consider whether certain Epson ink cartridges which could only be used in Epson stylus ink jet printers were to be classified under 3215 as ink or under 8473 as parts of machines of heading 8471. It can be seen that the issue in Turbon 1 is the same as that in the present case before the tribunal. However Turbon 1 concerned what has been referred to as 1^st generation ink cartridges whereas the case before us concerns 2^nd and 3^rd generation cartridges. There is no dispute that the 2^nd and 3^rd generation cartridges do differ from the 1^st generation cartridges although the experts disagree as to the significance of these differences.

In Turbon 1 the Court after referring to the point raised by the National Court whether the cartridge should be regarded as a part under heading 8473 stated at paragraphs 30 and 31 of its judgment:

"30. In that connection, it should be observed that the word part within the meaning of CN heading 8473 implies a whole for the operation of which the part is essential (See Peacock cited above, paragraph 21.) and this is not so in the case of the cartridge at issue in the main proceedings. While it is true that without an ink cartridge a printer is not able to carry out its intended functions, the fact remains that the mechanical and electronic functioning of the printer itself is not in any way dependent on such a cartridge. The inability of the printer in the absence of an ink cartridge to transcribe on to paper the work produced with the aid of a computer is caused by lack of ink rather than a malfunctioning of the printer.

For these reasons an ink cartridge such as that at issue in the main proceedings which in view of its characteristics as described by Turbon International in its written observations plays no particular role in the actual mechanical functioning of the printer cannot be regarded as part of a printer within the meaning of CN heading 8473."

In Turbon 1 the Court concluded that the ink cartridges in question were to be classified as "ink" under heading 3215. The Court also observed (paragraph 34) that this classification was corroborated by the HSEN relating to heading 3215 which includes "mere ink filled cartridges for ordinary fountain pens".

"As the Advocate-General rightly indicates at point 59 of his opinion, such cartridges are to fountain pens what the cartridges at issue in the main proceedings are to ESC printers, since their function is both to hold the ink and to release a regular flow of ink necessary for the use of an instrument designed to print on paper and they have a format, which varies according to brand, such as to allow them to fit inside the pen for which they are designed".

The conclusion of the Court as set out at paragraph 35 of its judgment was that the CN must be interpreted as meaning that an ink cartridge without integrated printhead consisting of plastic casing, foam, a metal screen, seals, tape seal, labels, ink and packing material which as regards both the cartridges and the ink can only be used in a printer with the same characteristics as ESC printers, is to be classified under the CN subheading 3215 90 80…."

The decision in Turbon 1 has however given rise to a difficulty. The National Court on 15 June 2005 referred the matter back to the European Court (Turbon 2). In Turbon 2 the National Court has asked whether contrary to the ruling in Turbon 1 the ink cartridge in question should not be classified as a part under CN8473 "because the mechanical and electronic functioning of the printer is dependant upon the presence of a cartridge of that kind?" From the further reference it appears that the National Court considered that Turbon 1 was decided upon the incorrect factual basis that the printer could go through all its operations without the need for any ink cartridge to be inserted into the printer and that the only reason a document was not reproduced on the paper was due to the absence of ink. On the evidence which the National Court accepted it would seem that the printer will not operate unless an ink cartridge has been inserted into the printer although it is not necessary for the cartridge to contain any ink. The view of the National Court was that it was bound to apply the classification determined in Turbon 1 even though it had been given on an incorrect factual basis and that accordingly it was appropriate to refer the matter back to the court with a request for a review and a decision. A decision on this request in Turbon 2 is awaited.

In our judgment we are bound by the interpretation of the meaning of "part" in CN 8473 laid down by the Court in Peacock and in Turbon 1. However it does not follow that the present appeal is concluded by the decision in Turbon 1 that the cartridge in that case was to be classified under 3215. As we have already stated the cartridges are not the same and the extent and nature and effect of any differences are matters which this tribunal should determine.

The cartridges

We turn now to consider the evidence in relation to the cartridges the UK classification of which is in dispute before us. The cartridges the subject of the appeal are Epson ink cartridges specifically designed for use with a number of specific types of Epson ink jet printers. The cartridges are supplied separately from the printer and when supplied either with the printer or subsequently when it is necessary to replace the cartridge when the ink has been consumed, they are supplied in an air tight evacuated plastic bag. The reason for the airtight bag is to prevent air from getting into the cartridge and thereby to clog the cartridge as a result of evaporation of the ink. Even where in the case of the 3^rd generation cartridges the valves are closed the cartridge is thus protected in transit. The shelf life of the cartridge is thereby extended. The cartridges are supplied filled with either black ink or coloured ink or inks.

The particular cartridges in question in the present appeal are what are known as 2nd and 3rd generation Epson cartridges. Typical of a 2nd generation cartridge are the EPSON TO 36 (black) and TO 37 (coloured) cartridges. The 3rd generation cartridges are TO 441/TO 461. They too are supplied containing either black or coloured ink (TO 443). The design of the cartridges is such that the cartridges may be inserted manually into the appropriate holder or holders on the printer. The cartridges have locating spigots on their outer surfaces which ensure that that the correct cartridge is inserted into the correct holder.

The cartridges consist of a number of components. There is an injected moulded plastic body. On the underside of the cartridge is a synthetic rubber delivery port valve. This fits into the delivery port. The valve will open mechanically as a result of the action of the mating half when the cartridge is inserted into the printer. The mating half is on the main printer body and is clearly part of the printer. Ink will then be presented directly to the printhead in the printer. It is the printhead which uses the ink to produce the document on the paper fed into the printer.

The cartridges consist of a moulded injection plastic main body within which the ink is contained. In the case of the 2nd generation cartridges the ink is contained within a specially designed sponge (or foam) into which the ink is injected under pressure during the manufacturing process. The sponge is in compression and it fills most of the space within the cartridge. In the case of the 3rd generation cartridges the ink fills a complex series of channels, reservoirs and veins within the body of the cartridge and there is no sponge though there is a special valve referred to below. The cartridges have been designed so that the ink will flow at the appropriate rate within the cartridge to the delivery port from which it is drawn into the printhead. The printhead is operated piezo electrically and requires a negative pressure at the printhead. This aspect is controlled by controls within the printer.

Within the cartridge the flow of ink to the delivery port is regulated in the case of the 2nd generation cartridges by the characteristics or properties of the specially designed sponge and also by a series of narrow sinuous channels in the top of the cartridge colloquially known as a "snake road" through or along which air can flow at an appropriate rate from the atmosphere thereby relieving any restriction in the ink flow due to any vacuum which would be caused within the cartridge as a result of ink flowing from the cartridge into the printer. The design of the snake road is also such that any evaporation of the ink with consequent clogging of ink within the cartridge is minimised. The ingress point for the air is a small hole in the cartridge leading to the snake road which is sealed by a removable plastic film but which is removed by the user when the cartridge is first inserted into the printer.

In the case of the 3rd generation cartridges the rate of flow of the ink to the delivery port is regulated by what has been referred to as a smart valve. Again there is a snake road designed into the cartridge body to relieve any vacuum. The ingress of air is regulated by means of an air inlet tunnel and an air push valve. When the cartridge is inserted into the printer the air push valve is activated mechanically by a mating half in the printer. The valve has a spring return. There is also a vent film within the cartridge. It is a one way film which prevents ink flowing back into the snake road but which allows air to flow into the ink void to replace used ink. The smart valve which regulates the flow of the ink to the delivery port is sensitive to pressure within the ink and reacts accordingly thereby maintaining the correct rate of flow and pressure within the ink to the delivery port.

The delivery port in both the 2nd and 3rd generation cartridges contains a synthetic rubber valve through which the ink is drawn by the printer to the printhead. This valve is designed to open mechanically when the cartridge is inserted into the printer and is in contact with the mating half in the printer. One of the differences between the 1st generation and the 2^nd and 3rd generation cartridges is that the rubber seal will automatically close when the cartridge is removed from the printer, thus preventing both any remaining ink within the cartridge from leaking out and any ingress of air into the cartridge which could cause the ink to congeal and clog the cartridge. The 2nd and 3rd generation cartridges have thus been designed to be removable at the option of the user. Both the experts in their reports have accepted that this feature can be of use to some users. Thus for example in multi-user environments such as a school where printers may be provided for general use this facility will enable the cartridges to be removed when the particular task for which they are being used has been completed and the partly used cartridges may then be securely stored until they are needed again. Removability also permits a partly used cartridge to be taken out of the printer and used again later if for example it is desired to carry out a lengthy printing job overnight when no one is present and there is a risk that there might not be sufficient ink remaining in the cartridge to complete the job.

As we note in the next paragraphs of this decision, there are also electronic elements in the 2nd and 3rd generation cartridges and in the printer which will via the screen on the PC inform the user of the estimated amount of ink left in the 2^nd and 3rd generation cartridges. In the case of the 1st generation Epson cartridges because the cartridge was not designed to be removable, the printer made its own estimate as to how much ink was remaining based on how much had been put into the cartridge initially. If the cartridge were removed and replaced however the printer assumed that the cartridge was a new full one. If a 1st generation cartridge were removed from the printer before the ink had been fully consumed, there was also a risk of the loss by leakage of ink from the cartridge and also the uncontrolled ingress of air into the cartridge through the delivery port could cause evaporation and congealing of the ink within the cartridge. There is no evidence before us as to the extent to which users in fact avail themselves of the facility to remove the cartridge but we accept that this facility could be of benefit to some users.

As well as having a delivery port valve, the 2nd and 3rd generation cartridges also differ from the 1st generation cartridges in that they each have both a printed circuit board and an electronic chip which are permanently fixed to the side of the cartridges. The printed circuit board has 7 pads or copper connectors on its outer face. These pads make direct electrical contact with 7 spring contacts in the printer when the cartridge is inserted into the printer. The evidence is that in the case of the TO 36 cartridge only 5 or 6 of the pads on the cartridge are connected to the electronic chip behind the circuit board but in the case of TO 37 and the 3rd generation cartridges all 7 pads are connected to the chip. It is likely that fewer connections are required for the single black TO 36 cartridge than are required for the composite coloured TO 37 cartridge and the 3rd generation cartridges.

The electronic chip is a memory device and it has both read and write functions. The circuit board and the chip are the subject of a European patent, EP 1 004 449 A2 which was filed in 1999 and published on 31 May 2000. The patent refers to a cartridge "detachably attached" to a printing apparatus. The main function of the chip so far as the user is concerned is to store information as to the amount of ink in the cartridge which has been used and that which is available to be used. The evidence of Mr. Sykes which was not challenged and which we accept is that as ink from the cartridge is used, electronics in the main body of the printer effect a transfer of data to the chip on the cartridge and read the initial quantities of ink from the values stored in the chip. When a print job has been completed, the electronics in the printer write back to the chip the new lower amount of ink in the cartridge calculated from the number and size of the ink droplets which have been deposited on the paper during the printing process by the piezo-electric printhead. These new lower values are then stored on the chip and remain until the next time the cartridge is used to print a document. A feature of the system and the reason why the chip has been located on the cartridge rather than within the printer itself is that the cartridge has been designed as a removable cartridge which can after removal be replaced not only into the same printer but also into any other compatible Epson printer which will on insertion then be able to read the chip and ascertain the amount of ink still remaining in the cartridge.

We have been careful to use the term " transfer of data" in the paragraph above. In his reports and in his evidence Mr. Sykes the Appellant's expert used the word "communicate" as part of his description of the advanced technology in the 2^nd and 3^rd generation cartridges which led to a 2-way and indeed a 3-way communication process. Mr. Clues the expert for the Commissioners sought first in his evidence to the tribunal to correct his own use of "communication" or like words where they had occurred in his reports which he wished to replace with "data transfer". It is clear to us that information passes as part of a process operating between the printer and the cartridge. The printer reads the information on the cartridge. Mr. Clues accepted that to be the case though he saw the role of the cartridge as low level and passive rather than creative. We do not propose to look at the semantics but rather have looked at the nature of the information or data passing and its function within the printing process.

The provision of information on the amount of ink remaining within the cartridge serves 2 main purposes. First, it enables the user the better to judge whether there is sufficient ink remaining in the cartridge to carry out the printing jobs the user may wish to carry out. Secondly, it is an important safety feature which can prevent damage occurring to the printhead if it attempts to print when there is not sufficient ink in the cartridge. Dry printing (or dry firing) can cause damage to the printhead. As appears later in this decision, the printer will not in fact begin to print or continue printing if the printer senses from the information stored on the chip that there is not sufficient ink left in the cartridge to enable printing to be carried out without damage to the printhead occurring as a result of dry printing.

In addition to containing information on the amount of ink remaining, the chip also contains a quantity of "service information" which can be accessed by the manufacturer of the cartridge if the cartridge should be returned to it under warranty or for service or if a faulty batch has been manufactured. The information which is placed on the chip during manufacture of the cartridge covers such matters as the date and time of manufacture, the storage life of the ink when sealed and unsealed, the frequency of attachment and frequency of cleaning of the printhead, the type of ink and other similar information. It was also Mr. Sykes' evidence that he had been informed by Epson that the cost of the ink in the cartridges was a relatively small part of the overall manufacturing cost of the cartridges. We see no reason to doubt that this is correct and we accept that evidence. The 2nd and 3rd generation cartridges are sophisticated items. Although we understand that it may in fact be possible to refill a used Epson ink cartridge, this is not recommended by Epson and we are satisfied and find that the cartridges when used are intended to be replaced by a new cartridge. The 2nd and 3rd generation cartridges are we find also disposable items in the sense that they have been designed and are intended by the manufacturer to be disposed of once the ink within the cartridge has been used.

Both Mr. Clues and Mr. Sykes in their respective reports have concentrated upon the characteristics of the cartridges and neither has specifically dealt with how the printers actually operate if an attempt is made to use the printer to print a document either if there is no cartridge in the printer or if the cartridge does not contain ink. However this question was raised in the examination-in-chief of Mr. Sykes. His answers were not challenged or contradicted by any subsequent evidence from Mr. Clues. Mr. Sykes explained that when the level of ink remaining in the cartridge was, as a result of communication with the chip, detected by the printer as becoming low a warning triangle would be flashed up on the screen of the PC accompanied by an exclamation mark. If printing continued, eventually a red circle with a cross in it would appear on the user's screen which as Mr. Sykes put it meant that the PC was saying "That is it; it [the ink] has not run out but you cannot use it any more because if it did run out, you would get dry firing and the printhead would get damaged; clogged first of all and then damaged as it dried out. So the system is clever enough to say: I need to leave enough ink in the base of the print mechanism to preserve it so that it does not get dry. A bit like an oil warning light in your car, I suppose, you do not want to run out and do some damage before you top it up. So, this is stopping you working. This printer will not print under these circumstances. So this chip directly prevents the printer from operating. By operating I was asked to consider this from first principles, the operation of a printer is to print, in simple terms, in my view. And this stops it printing. It may still operate to warn as it is doing but in my view printing is printing and it is stopped from doing that." (Transcript Day 1 pp. 37, 38)

Later at pp. 57, 58 Mr. Sykes made clear that the actual printing was prevented if there was not enough ink in the cartridge or no cartridge or if the chip or the connections were defective. When he was asked what would happen if a cartridge was inserted into the printer but which had a chip which was not working properly, Mr. Sykes said that the printer was in constant communication with the chip on the cartridge and that if there was a defect in the electronic connections or in the chip "it will not get an answer back or if it does get an answer that it does not recognise because something is damaged or malfunctioning, if it does not get the right answer or no answer at all it will say "faulty cartridge" or "cartridge not present" and it will not allow you to print".

It is in our judgment clear from the evidence of Mr. Sykes, which was not challenged and which we accept, that the printer will not actually print a document unless after communicating with the chip it is satisfied that there is sufficient ink left in the cartridge to enable printing to be carried out without the risk of dry firing occurring and consequent damage being caused to the printhead. We are also satisfied that if no cartridge is present in the printer or if the chip is defective printing cannot proceed. The situation thus appears to be different from that considered in Turbon 1 where it seems that it was possible for the printer to go through the whole printing process although there was no ink in the cartridge. In the case of the 2nd and 3rd generation cartridges, dry firing is not possible and it cannot be said that the only reason an image does not appear on the paper which is fed into the machine is because there is no ink in the cartridge. Unless the printer can read from the chip in the cartridge that there is sufficient ink remaining in the cartridge for printing to proceed without the risk of damaging the printhead as a result of dry firing, it is simply not possible for the printing process to occur.

The question which Mr. Clues has addressed in his report of 7 October 2004 is not it seems to us the question which the tribunal has to address. The question which he was asked to consider was whether the cartridges were consumables or not. There is not however any classification in the CN of consumables as such. His conclusion that the cartridges are consumables does not in our view determine the question whether the cartridges should be classified as ink or as parts of a printer. The cartridges are clearly intended to be disposed of when the remaining ink in them has fallen to a level at which it is not safe to print without risking damage to the printhead. It does not follow however that because the ink may be consumed by use in the printer that the actual cartridge is also to be regarded as a consumable. Further, the fact that the cartridge may be disposable does not mean that it is also a consumable. It is clear as a fact that the actual plastic cartridge and the features physically attached to it are not actually consumed in usage at all. Whether the cartridge is to be classified as ink or as something else depends upon the essential nature of the cartridge at the time when it is imported into the EU with ink in it and not upon whether it is a consumable or not. We did not find Mr. Clues' conclusion that the cartridge was a consumable helpful.

Mr. Clues expressed the opinion that although the printer would not be able to print without the presence in the printer of ink cartridges containing ink, nevertheless the printer was still functioning as it had been designed to do because it was able to make contact with the PC and cause a warning message to appear on the screen of the PC.

"In other words, the printer is designed to recognise the presence or absence of the cartridge and then to take actions depending on how much ink is estimated to be in the cartridge. The printer does not malfunction without the cartridge being present. The absence of communication between the cartridge and the printer will be noticed by the printer as part of its normal operation. It will not cause a malfunction".

Paragraph 4.6 of his report of 7 October 2004. Earlier at paragraph 3.2 Mr. Clues had stated: "Essentially the printing process requires the depositing of ink in a controlled pattern such that the required image is reproduced on the sheet of paper. The component responsible for depositing the ink on to the paper is called a 'printhead'". Mr. Sykes commented on this passage at paragraph 8 of his report dated 16 February 2006 saying: "It seems to me that Mr. Clues is stating the principle (sic) function of a printer. I agree with him in this regard." We too agree that the principal function of a printer is to reproduce images on the sheet of paper. We also consider that the printer without a cartridge or without sufficient ink in the cartridge cannot be said to have broken down. However it cannot perform its primary or main function which is to print a document. It does not however in our view follow from the fact that the printer can "communicate" to the PC and inform the user that it cannot start to print or cannot continue to print that the cartridge cannot be a part of the printer. Whether it is to be regarded as a part or not depends upon whether the presence of the cartridge can properly be said to be essential to the operation of the printer. (See Peacock paragraph 21 and Turbon 1 paragraph 30.)

Earlier tribunal decision

In considering whether a 1st generation Epson ink cartridge was to be classified as a part of the printer or as ink for the purposes of the CN this tribunal in Epson Telford Limited v Commissioners of Customs and Excise (MAN/ 99/7040) considered that the cartridge was clearly not a part of the printer based on the fact that Epson's own Stylus Set-up and Daily Use Manual distinguished at page 22 between the printer and the cartridge warning that other products not manufactured by Epson might damage the printer and that if the ink runs out you cannot continue printing. In that case the tribunal concluded that the cartridge was merely a reservoir or container for holding the ink. The tribunal did however state (obiter) that if the cartridge had some means of communicating to the printer it would become more than an ink reservoir and would become an essential part of the machine. " It needs the added circuitry to enable the printer to operate. In these circumstances we are of opinion that that ink cartridge is part of the machine". In the present case the printed circuit boards and electronic chip on the 2^nd and 3^rd generation cartridges do provide a means for communication between the printer and the cartridge in that information as to the estimated amount of ink is transferred between the printer and the cartridge. If there is not sufficient ink remaining in the cartridge to enable printing to proceed without the risk of damage to the printhead as a result of dry firing , the printing operation will cease. Similarly if the cartridge has insufficient ink in it when inserted into the printer printing will not be possible.

Since the decision of this tribunal in MAN/99/7040 the question of what is meant by a part for the purposes of heading 8473 has been considered by the European Court in the cases of Peacock and Turbon 1 to which we have already referred. These decisions have in our view authoritatively laid down the principle that " 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 Common Customs Tariff and of the notes to the sections or chapters". (See paragraph 21 of the judgment in Turbon 1). In relation to whether an article should be regarded as a part within the meaning of CN heading 8473 the Court at paragraph 30 of the judgment stated (as quoted previously by us):

"In that connection, it should be observed that the word part within the meaning of CN heading 8473 implies a whole for the operation of which the part is essential". The Court concluded that the cartridge in that case was not a part because " while it is true that without an ink cartridge the printer is not able to carry out its intended functions, the fact remains that the mechanical and electronic functioning of the printer in itself is not in any way dependent on such a cartridge. The inability of the printer in the absence of an ink cartridge to transcribe on to paper the work produced with the aid of a computer is caused by lack of ink rather than a malfunctioning of the printer".