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United Kingdom VAT & Duties Tribunals (Customs) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Customs) Decisions >> Fluke Europe Bv v Revenue & Customs [2006] UKVAT(Customs) C00228 (31 October 2006)
URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2006/C00228.html
Cite as: [2006] UKVAT(Customs) C00228, [2006] UKVAT(Customs) C228
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- This an appeal by Fluke Europe Limited against a decision on review dated 4 May 2005 upholding a decision to categorise two cable analysers, the SSP-4000 and the DTX ("the products"), under commodity code 903180 39 90 and to revoke a binding tariff information categorising them under 90 30. The Appellant was represented by Miss Valentina Sloane, and Customs by Mr Owain Thomas.
- This appeal had previously be consolidated with another (reference LON/05/7045) concerning another product, the Fluke 744 Documenting Process Calibrator. At the last minute the Appellant asked for the second appeal to be adjourned owing to the absence of their witness. At the start of the hearing we agreed to the deconsolidation and adjournment of the second appeal but on terms that the Appellant paid Customs' wasted costs since Mr Thomas's skeleton had dealt with it, and Customs were not given notice of the application.
- We had a demonstration of the products and of a network analyser by Jacqueline Jones BSc, EMEA Support Manager at Fluke Networks, who gave evidence and adopted a witness statement by her colleague Mark Mullins who was abroad, and we also had a report by the expert witness called by Customs, Mr Bevan Clues CEng MIEE, who also gave evidence. There was no significant disagreement between them and we found the combination of someone who had first-hand knowledge of the products and of an independent expert most helpful. We find the following facts:
- The two possible Chapters for the classification of the products are:
- The General Rules for the interpretation of the combined nomenclature provide:
- The HSEN, which is an aid to interpretation but is not legally binding, includes in Heading 90 30 (one of the sub-headings of which is "other instruments and apparatus, specially designed for telecommunications (for example, cross-talk meters, gain measuring instruments, distortion factor meters, psophometers)") a list of types of instruments that are included, such as impedance testers, nepermeters, cross-talk meters, transmission level indicators, instruments for measuring interference, psophometers and echo meters many of which functions are performed by the products, although in relation to shorter lengths of cable rather than long telephone circuits. It also states that it covers other instruments and apparatus which perform operations of a kind described in the heading, including valve testing or measuring instruments, in particular those for testing radio valves.
- Miss Sloane, for the Appellant, contends:
- Mr Thomas, for Customs, contends:
- In essence the issue is whether the products are instruments for measuring or checking electrical quantities. Miss Sloane says that they are. Mr Thomas says that they do not do this only; they do many other things which take them outside Heading 90 30.
- We start by setting out the guidance on this question from the European Court and from Commission Regulation 129/2005. In Shimadzu Europa GmbH v Oberfinanzdirektion Berlin Case C-218/89 the Court said:
- Accordingly, the question is whether the very purpose of the products is to carry out measurement or checking of electrical quantities, or to do something else (in Shimadzu collecting, evaluating and processing data in the field of chromatography), for which measuring and checking voltage was a means to that end. We understand this to be asking the real purpose. In other words is the checking of electrical quantities the real end or a means to another end? We do not understand that this should be taken too literally; the instrument will inevitably be used to measure or check for some reason, and instruments specifically designed for telecommunications are within 90 30. The issue is whether it is really measuring or checking, or whether the measuring or checking is incidental to something else.
- Commission Regulation 129/2005 ("the Regulation") provides another good example of an instrument whose purpose is "something else." It describes two different network analysers as follows:
- analysing the operational state of existing networks and network products
- simulating traffic and fault conditions into existing networks and network products,
- -- generating network traffic."
- The Shimadzu case and Regulation both illustrate what are essentially specific-purpose computers: respectively a "microprocessor-controlled analysis apparatus for chromatography" (the description in the question for the preliminary ruling), and network analysers. Such computers are to be classified by the specific function they perform (note 5E to Chapter 84). Those are at the end of the spectrum clearly falling outside Heading 90 30 and within Heading 90 31; at the other end of the spectrum is a multimeter, falling clearly within Heading 90 30. The issue for us is when something ceases to fall within Heading 90 30. This depends on whether the very purpose of the products is for measuring or checking electrical quantities. We understand by measuring the determination of quantity expressed as a figure. Checking involves either a yes or no result, such as whether current is passing at all, and in our view can also include checking whether the result is higher or lower that a pre-determined figure or within a pre-determined range.
- We ask ourselves what the products really do, or what is their very purpose. The answer is that they measure 344 electrical quantities required for cable testing; subtract the measurement from the limit set by the standard which is contained in the products' memory; show a pass or fail by reference to the measurement and the limit in the standard; and the amount by which it passes or fails on the worst case (the headroom). Some tests involve some additional simple arithmetic, such as the ratio of attenuation to crosstalk, and the sum for each cable pair of three of the crosstalk measurements. The wire map test involves checking (rather than measuring) an electrical quantity to determine whether the connectors are attached to the pairs at each end of the cable in the correct way. The monitoring of network activity that the DSP-4000 product is capable of doing is measuring an electrical quantity, namely voltage, either as a figure or as a peak, coupled with the calculation of percentages and averages; this falls far short of what a network analyser is normally capable of doing, such as monitoring the captured information to evaluate network performance. The measurement of the length of the cable (4 of the total number of results) is a function of time only, and not of any electrical quantity, but the time is measured by the time an electrical pulse takes to travel and is an electrical measurement though of time rather than quantity. The determination of the location of a fault involves measuring both time and an electrical quantity, the reflection of the signal. Additional features of the products are the storage of results on a memory card and the ability to export them to a printer or computer; and the ability for the operators at each end to communicate using the headphones. The products' ability to measure performance of fibre optic cable does not involve any measurement of electrical quantities, but this is merely a capability of the products if an additional interface adapter is bought, and not of the products as presented, although the relevant standards are included in the products' memory.
- The main function is, in our view, the measurement or checking of electrical quantities, with the results being available in the form of those quantities (or a graphical display of some of them). The issue is whether the specific function of the products being to measure electrical quantities for the purpose of cable testing means that they can no longer be properly described as instruments for measuring or checking electrical quantities. We do not consider that this makes any difference; the function is still making the measurements and checks, and cable testing is the purpose of making the measurements, just as Heading 90 30 contains instruments specially designed for telecommunications. We regard the display of the results in numerical or graphic form and the ability to store them and export them to a printer or computer as incidental to their measurement. Does the holding in the products' memory of standards setting limits to each of the results and the comparison of the results with the limits by subtracting one from the other to show a pass or fail and the headroom affect the very purpose of the products? In our view it does not. The significant feature is the measurement and this is no more than utilisation of the measurements for a particular purpose in a time-saving form. A cable installer could buy the standard and compare each measurement with the limit manually; the products merely save him the trouble of doing this, which is an obvious feature to be coupled with the measurement when large numbers of results are measured. We do not consider that the additional features, including the measurement of cable length, the display of the likely cause of a failure, the ability for the operators to communicate, the network analysis feature of the DSP-4000 product (which we do not consider does anything other than measurement of electrical quantities and making arithmetic calculations based on them), the additional arithmetic calculations required by some of the tests, and the potential ability of the products with additional interfaces to make non-electrical measurements on fibre optic cables, change this objective character of the products. Standing back, we consider that the very purpose of measurement predominates so that it is still the case that the best description of the products is that they are instruments for measuring or checking electrical quantities. We regard the significant feature that the measurements of electrical quantities are part of the results, and not, as in the Shimadzu case and the Regulation, a means to achieving another end. Here the measurements are very much the end in themselves and form part of the end result, the comparison of such results with the standard.
- Accordingly we categorise the products under Heading 90 30. It is not in dispute that the full classification under this heading is 9030839000.
- Accordingly we allow the appeal with costs to be determined on the standard basis by a Taxing Master of the Supreme Court.
- As stated above, we allowed an adjournment of appeal LON/05/7045 relating to the calibrator on terms that the Appellant paid Customs' wasted costs which we also direct to be determined on the standard basis by a Taxing Master of the Supreme Court. We direct the Appellant to inform the Tribunal within 3 months of the date of release of this Decision whether it wishes to pursue that appeal.
C00228
CUSTOMS DUTY – computer cable testers – whether instruments for measuring and checking electrical quantities (Heading 90 30) or measuring or checking instruments not included elsewhere (Heading 90 31) – the former – appeal allowed
LONDON TRIBUNAL CENTRE
FLUKE EUROPE BV Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS Respondents
Tribunal: DR JOHN F AVERY JONES CBE (Chairman)
SHAWAR SADIQUE MPhil MSc
Sitting in public in London on 11 and 12 October 2006
Valentina Sloane, counsel, instructed by Vantis Custom House, for the Appellant
Owain Thomas, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2006
DECISION
(1) The products are the DSP-4000 series of digital cable analyzers and the later version the DTX cable analyser. A cable tester (or analyser) is used by installation engineers installing computer cabling in buildings. This will be carried out by a specialist contractor who will be required to test each cable between the socket on the wall and the telecommunications closet (the test will include the cable connecting the product at each end) to a certain standard determined by the customer, and provide a print-out of the result of the tests. The products are simple to use and are commonly used by electricians and trades-people who have been on a half-day course.
(2) The cable in question contains eight copper wires in four twisted pairs. The tests measure principally the amount of resistance, return loss and crosstalk (the signal in one wire within the cable escaping to another wire) within the cable by sending a pulse through the cable and measuring the differential when the pulse is returned. The product comprises a main unit of hand-held size with the controls and a remote unit without any controls which is fitted to the other end of the cable.
(3) In practice it is likely to be used in autotest mode under which when one button is pressed it will perform a series of measurements, compare these to the industry standard that has been set and give a reading on its screen showing a tick for a pass or cross for a fail and the actual reading in about 35 seconds. The screen shows the result in the following form (with the ability to scroll down for more results):
| Summary | PASS |
| TIA Cat 6 Perm link | TIA Cat 6 Perm link |
| √ | Wire map |
| √ | Length 28.8 m |
| √ | Prop. Delay |
| √ | Delay Skew |
| √ | Insertion Loss (21.5 dB) |
| √ | Return Loss (4.5 dB) |
| √ | NEXT (7.9 dB) |
| √ | PSNEXT (9.9 dB) |
(4) Alternatively the tests can be performed singly, including running a test continuously to help identify intermittent faults.
(5) The tests will provide the following: headroom report (the worst-case amount by which it passes the tests); wire map (whether the wires are correctly connected to the connectors at both ends); resistance; length of the cable; propagation delay (the time for the signal to travel the length of each cable pair, a measure of conductivity); delay skew (the differences in propagation delays between the cable pairs); impedance (demonstrating a break in the cable); near-end, and equal level far-end, crosstalk (the degree to which the signal escapes from one wire to another: the former is NEXT in the sample screen above); attenuation (strength of signal); the ratio of attenuation to crosstalk; return loss (loss of signal on both journeys); power sum near-end crosstalk (the sum of near-end crosstalk for all the pairs of wires: PSNEXT in the sample screen above); power sum equal level far-end crosstalk (the sum of this for all the pairs); power sum attenuation to crosstalk ratios (the sum of this for all the pairs). The products contain a self-calibration function which is recommended to use every 30 days.
(6) The length of the cable is a measurement of the time taken for a short pulse to travel through the cable given the speed of travel of the signal set by the nominal velocity of propagation of the particular cable. Time is also used in the determination of location of the fault by measuring the time a signal is reflected from each end, for example because of an impedance anomaly. All of the other tests involve the measurement of electrical quantities, some with additional arithmetical calculations.
(7) The results are stored on a memory card from which they can be downloaded to a computer and then printed (or printed directly). The print-out shows the number of the cable, the site, the operator, the standard and its version, the cable type and its nominal velocity of propagation (the percentage of the speed of light that electrical signals travel in the cable of this type, which is relevant to measuring the length of the cable) and whether it has passed or failed and the headroom. It shows for each pair of wires the connections of the pins at each end, the length, propagation delay, delay skew, resistance, impedance and attenuation (potentially 56 results including the limits from the standard, of which 24 are direct measurements). It also shows the crosstalk figures for the outgoing signal and the return signal separately divided into worst margin, worst value, giving the value and limit (from the appropriate standard) at four different frequencies (480 results in total including the limits from the standard, of which 320 are direct measurements (including records of the different frequencies at which some of the tests are made, which frequencies we assume are pre-set rather than measured). Alternatively many of the results can be shown in graph form.
(8) If the test fails pressing another button results in a display showing the location of the failure on the cable, the failure (such as "pairs 1,2-3,6 NEXT [near end crosstalk] failure") and also giving information on the likely cause of the failure, such as "cable may be bad; check connector." The cause is displayed from a look-up table based on the most likely cause.
(9) Another feature of the DSP-4000 product, but not the DTX product, is using a link interface adapter sold as standard the product will measure network activity on Ethernet systems for collisions (by measuring excess voltage, which is assumed to represent collisions), jabber (packets that are too long), and percentage of system utilisation. These are basic network analyser tests and, unlike the normal tests, are performed when the cable is live. They measure electrical activity on the network but do not carry out any analysis in the way a network analyser can do. The results are the percentage utilisation of the network's transmission bandwidth over the last second, the average of all the one-second utilisation percentages since the start of the test, the highest percentage recorded since the start of the test; the percentage of collision frames of the total number of frames detected in the last one second, the average of such percentages since the start of the test and the peak percentage recorded; and whether jabber is detected. This feature is mainly required by Japanese customers; it would not be likely to be used by cable installers in other countries. The feature also includes a hub port locator (sending a signal which causes a flashing light at the hub for identification of the cable).
(10) If the headset is plugged in the products allow the operators at each end of the cable to talk to each other.
(11) The products will also operate to test fibre optic cable using an additional module which is available for purchase separately. This module contains a light source and receiving equipment. The standards are included in the products' memory. These tests do not measure electrical quantities.
(12) Network analysers (which are relevant because they are classified by Commission Regulation 129/2005, see below) are used by network managers who typically would have a degree in computer science or an industry qualification. Network analysers measure activity on the network and have the ability to decode protocols. They generally use a PC. The one demonstrated to us was entirely a software application running on a PC, although a more powerful network interface card may be required. Their results are displayed on a computer screen. They are typically used for periods from 30 minutes to two weeks (and sometimes continuously). They count, capture, and use software to decode, packets. They work with different industry standards. We were also shown a description of a network analyser from "LANTimes" as follows:
"A network analyzer is a monitoring, testing, and troubleshooting device. Network administrators attach a network analyzer to a network and capture network traffic. The captured frames are displayed in raw or filtered form for network technicians to evaluate….
Network analyzers operate in what is called promiscuous mode. They listen to all traffic on a network, not just traffic that has been addressed to them. The technician can choose to capture frames transmitted by a particular network computer or frames that carry information for a particular application or service. The captured information is then monitored to evaluate network performance, locate bottlenecks, or even track security breaches."
90 30 [for which the Appellant contends, and as originally categorised by the BTI]
"Oscilloscopes, spectrum analysers and other instruments and apparatus for measuring or checking electrical quantities, excluding….[it is common ground that the exclusion is inapplicable]; instruments and apparatus for measuring or detecting alpha, beta, gamma, X-Ray, cosmic or other ionising radiations"
90 31 [for which Customs contends]
"Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this Chapter; profile projectors"
"1. The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such heading or notes do not otherwise require, according to the following provisions…".
(1) The products measure and check electrical quantities. They carry out the same functions as impedance testers, nepermeters (which measure attenuation) and cross-talk meters which are listed in the HSEN. The fact that they combine various functions does not prevent them from being included; the HSEN mentions multimeters which measure voltage, current, resistance and capacitance. It is not material that their function is to test cables; the separate meters listed in the HSEN are all used for checking telecommunications equipment.
(2) The products are quite different from the network analysers dealt with in the Regulation. Network analysers carry out a far more sophisticated function, as described in the Regulation. The products operate fairly basically at the physical layer of the protocol stack. As the ECJ said in Hewlett Packard Case C-119/99 "…a classification regulation is of general application in so far as it does not apply to an individual trader but, in general, to products which are the same as that examined by the Customs Code Committee" (paragraph 19). The Advocate General in the same case pointed out: "…where reasoning by analogy is employed great care is called for" (paragraph 24).
(3) The products are not excluded from heading 9030 because they do more than measure electricity. That is not an inference that can be drawn from the Regulation. The fact that the products are called analysers does not make them analogous to network analysers; spectum analysers are included in heading 9030. The only analysis is to show a pass or fail result; impedance testers which are mentioned in the HSEN do the same.
(1) The terms of heading 9030 are clear and do not include a product that goes beyond measuring and checking electrical quantities. Heading 9031 includes other measuring and checking machines.
(2) The products have a specific function in detecting faults in cables, including identifying the fault and locating it and diagnosing what the problem might be. They are properly called analysers. They go beyond measuring and checking in measuring the length of the cable; the wire map test; and calculating the attenuation to crosstalk ratio.
(3) It is accepted that the products carry out many of the functions carried out by other machines listed in the HSENs to 9030. However, none of they performs a variety of tests for a specific purpose.
(4) Unlike the HSENs the Regulation is legally binding. Network analysers also measure and check electrical quantities. The fact that the products operate only at level 1 is not relevant.
"10 In its judgment in Case 19/88 ICT and Others v Direction générale des douanes et droits indirects [1989] ECR 577, with regard to the provisions of subheading 90.28 A II ( a ) of the Common Customs Tariff [which was different from the current 90 30], the Court ruled that apparatus for measuring electrical quantities was apparatus specifically intended to carry out such measurement .
11 The same interpretation, based on the purpose of the apparatus in question, must also be applied to define the content of Heading 9030 of the Combined Nomenclature, the provisions of which are in this respect similar to those of subheading 90.28 A II a) of the Common Customs Tariff.
12 Accordingly only apparatus whose very purpose is to carry out checks on electrical quantities can be regarded as apparatus for checking such quantities.
13 It follows that pieces of apparatus like those at issue in the main proceedings, which, according to the information supplied by the Bundesfinanzhof, are intended not to measure or check electrical quantities but, on the basis of measuring and checking an electrical quantity, namely voltage, to present and process chromatograms, cannot be classified as 'instruments and apparatus for measuring or checking electrical quantities.'
14 The answer to the Bundesfinanzhof's question should therefore be that the Combined Nomenclature should be interpreted as meaning that apparatus which measures or checks electrical quantities only for the purpose of collecting, evaluating and processing data in the field of chromatography does not fall within Heading 9030."
"3. A network analyser, consisting of an analyser module, a capture memory and an interface to an automatic data processing (ADP) machine, in a single housing.
The analyser is designed to provide information on the performance of networks by monitoring network activity, decoding all major protocols, and generating network traffic.
The ADP machine is not presented with the analyser."
"4. A network analyser consisting of a central management bus, an analyser module, an automatic data processing machine, a monitor and a keyboard, in a single housing.
The analyser is designed to perform the following functions:
It categorises them under Heading 90 31, giving as one of the reasons:
"The analyser is specifically designed for analysing the traffic in a network and not for measuring or checking electrical quantities, thus being excluded from heading 90 30"
JOHN F AVERY JONES
CHAIRMAN
RELEASE DATE: 31 October 2006
LON/05/7044