United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2007] UKVAT(Customs) C00246, [2007] UKVAT(Customs) C246

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Gaybo Ltd (t/a Perception Kayaks v Revenue & Customs [2007] UKSPC (26 October 2007)

C00246

CUSTOMS DUTY - binding tariff information – classification of paddles – whether toys, games and sports requisites: parts and accessories thereof under Chapter 95 or plastics and articles thereof under Chapter 39 – held plastics – Appeal Dismissed

LONDON TRIBUNAL CENTRE

GAYBO LIMITED T/A PERCEPTION KAYAKS Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

CYRIL SHAW FCA (Member)

Sitting in public in London on 3 September 2007

Graham Goldsmith for the Appellant

Ben Collins, counsel instructed by the Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The Appeal

The Appellant was appealing against the Respondents' decision on review dated 22 November 2006 to uphold a customs duty classification of kayak paddles issued under Binding Tariff Information (BTI) referenced 115745279.

The Dispute

The dispute concerned the correct tariff classification for three types of kayak paddles.

The Appellant contended that the paddles should be classified under Chapter 95 of the Combined Nomenclature which was headed "Toys, Games and Sports Requisites: Parts and Accessories Thereof". The Respondents countered that the correct classification for paddles was under Chapter 39 headed "Plastics and Articles Thereof", in particular 3926 90 50 which was the "Other" category for "Plastics".

The Facts

The paddle comprised three sets of components, a shaft, two wide blades (one on each end of the shaft) and two drip rings with one ring placed above a blade on the shaft.

The BTI applied to three types of paddles marketed under the "Originz" label which differed from each other in respect of their constituent materials:

Paddle One: blades of 25 per cent glass fibre filled polypropylene with a high tensile alloy shaft.

Paddle Two: blades of 20 per cent glass fibre filled high temperature nylon with mandrel wrapped glass fibre shafts.

Paddle Three: blades of 20 per cent glass fibre filled high temperature nylon with mandrel wrapped carbon and glass fibre composite shaft.

The blades for the three paddles were injection moulded. Glass and carbon fibres were resins which were types of plastic. The constituent materials for the blades were plastic. The constituent materials for the shafts except for paddle one were plastic.

The paddles were used to propel kayaks through the water by inserting the blades in the water and pushing the water backwards. The shaft provided the means by which the person held onto the paddle. The drip rings stopped the water rolling down the shaft.

The Appellant sold the paddles principally as an accessory for a kayak. The paddles, however, could be used with other water craft, such as sit on and inflatable craft, and sail boards.

The Appellant's Representations

The Appellant submitted that the paddles should be classified under Chapter 95 of the Combined Nomenclature. Mr Goldsmith on behalf of the Appellant acknowledged that Chapter 95 did not cover "sports craft such as canoes and skiffs, or their means of propulsion". Mr Goldsmith, however, considered that the kayak was different in its description, appearance and purpose from a canoe. The kayak was a sitting craft powered by humans, whereas a canoe was an open craft which could be propelled by an outboard motor.

Mr Goldsmith pointed out that the paddles did not require the blades to propel the craft. Eskimos did not have blades on their paddles. The paddles could be used with other water craft, such as inflatable craft and sail boards. Mr Goldsmith submitted that the paddles were sport requisites and water sports equipment. The sport of kayaking bore many resemblances to skiing and surf/sail boards. In those circumstances the appropriate tariff classification was under 9506 which dealt with articles and equipment for general physical exercise and covered snow skis (9506 11), and water skis, surf boards, sail boards and other water sport equipment (9506 21 00 to 9506 29 00).

Mr Goldsmith compared his proposed classification with that of the Respondents which was under 3926 90 and included such articles as perforated buckets. In Mr Goldsmith's view the Respondents had been selective by concentrating on the material constituent of the blade to define the product for the purpose of customs duty. The blade was just one part of the paddle. The shaft could be made of alloy or aluminium rather than plastic.

The Respondents' Representations

The Respondents submitted that the paddles could not be classified under Chapter 95 because note 1(p) to that Chapter specifically excluded sports crafts such as canoes and skiffs or their means of propulsion. In the Respondents' view a kayak fell within the definition of sports crafts.

Chapter 89 (ships, boats and floating structures) provided the tariff classification for sports crafts, such as canoes and kayaks. Chapter 89, however, did not apply to boat parts and accessories, which precluded Chapter 89 from being used to determine the tariff classification for the paddles.

The Respondents considered that the blade gave the paddle its essential character. Thus as the blade was made of plastic, the correct classification for the paddles was under Chapter 39 and in particular the residual tariff (39 26 90 98 ) for the "other" category.

The Legislative Framework

Council Regulation (EEC) No 2658/87 (The Tariff Regulation) determines the proper classification of goods entering the European Community for customs purposes. Annex 1 of the Tariff Regulation contains the Combined Nomenclature which provides a systematic classification for all goods in international trade. The Combined Nomenclature comprises 21 sections containing 96 chapters which are subdivided into headings. Goods are identified under the Common Nomenclature by means of a classification code which is normally 10 digits in length. The chapter and heading numbers give the first four digits (the Tariff heading). The headings are then further divided resulting in a six digit code, known as the harmonised system code. The next two digits make up the European Community wide eight digit classification code. The remaining two digits are used where imports of certain products need distinguishing.

Council Regulation (EC) 2658/87 also sets out the general rules for the interpretation of the Combined Nomenclature. They are called the General Interpretative Rules (GIR) which consist of six rules. The Rules ensure that only one classification code is right for each commodity.

The following GIRs are relevant to this Appeal:

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 heading and any relative sections or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions.

2b. Any reference in a heading to a material or substance shall be taken to include a reference to 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 than one material or substance shall be according to the principles of rule 3.

3. 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 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 materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character in so far as this criterion is applicable;

(c) when goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration".

Reasons for Decision

In Bioforce GmbH v Oberfinanzdirektion München (Case 177/91) [1993] ECR 45, the European Court of Justice ruled that

"... the decisive criterion for the tariff classification of goods for customs purposes must be sought generally in their objective characteristics and properties, as defined by the wording of the headings of the Common Customs Tariff."

In Kaffee-Contor Bremen GmbH & Co KG v Hauptzollamt Bremen-Nord (Case 192/82) (1983) ECR 1769 the Court stated that

"... the decisive criteria for making a classification are not only the materials used, but both the external appearance of the article in question and the use to which they are normally put ...".

We are satisfied from the facts that the paddles were normally used to propel kayaks in water. The Appellant suggested that the paddles could be used in other water sports. The Appellant, however, supplied no evidence that the paddles were in fact sold or used for other water sports in sufficient numbers to displace their predominant use as kayak paddles.

We consider that the objective characteristics and properties of kayaks fit the description of sports crafts rather than of skis or surf/sail boards. Our conclusion is supported by the classification of kayaks under Chapter 89 of the Combined Nomenclature which deals with ships, boats and floating structures. The Appellant did not dispute the classification of kayaks under Chapter 89.

GIR 1 requires the tribunal to determine the classification of the paddles in accordance with the terms of the heading and any relative sections or chapter notes. Note 1(p) to Chapter 95 states that the terms of that Chapter do not apply to sports craft such as canoes and skiffs or their means of propulsion. In view of our findings that the paddles propel kayaks which are sports craft, we hold that the provisions of Chapter 95 cannot apply to the paddles.

Chapter 89 which is the chapter dealing with the classification for kayaks does not apply to kayak parts or accessories. The explanatory notes (HSEN) for Chapter 89 confirm that the Chapter makes no provision for parts (other than hulls) or accessories of ships, boats or floating structures. Although the explanatory notes are not binding upon us, we find them persuasive and hold that the paddles cannot be classified under Chapter 89.

Under GIR 1 the Tribunal is required to consider the other rules of interpretation before deciding upon the correct classification for the paddles. The provisions of GIR 3b apply to the circumstances of this Appeal because the paddles consist of different materials and components. Under GIR 3b the paddles shall be classified as if they consisted of the material or component which gives them their essential character. We are satisfied that the blades gave the paddles their essential character. The blades were placed in the water. They were the means by which the paddles propelled the kayak. The fact that paddles may consist solely of a shaft was irrelevant because in this Appeal we were considering the classification of paddles with blades. The blades were made of plastic. In accordance with GIR 3b the correct classification for paddles with plastic blades was under Chapter 39 dealing with plastics and articles thereof and in particular the residual tariff 3926 90 98 which applies to plastic goods not elsewhere particularised in Chapter 39.

Decision

For the above reasons we dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY OBE

CHAIRMAN

RELEASE DATE: 26 October 2007

LON 2006/7099