“The relevant legislation “2. The European Union is a customs union and liability to customs duty of goods imported from third countries into the United Kingdom depends on the provisions of Council Regulation (EEC) 2658/87 and Commission Regulation (EC) 1832/2002. The Council Regulation recited that the International Convention on the Harmonised Commodity Description and Coding System, to which the EU was a signatory, required the establishment of a combined nomenclature based on that of the harmonised system. By Article 1.1 a goods nomenclature, to be called 'the combined nomenclature' or 'CN' for short was established to meet the requirements of both the Common Customs Tariff and the external trade statistics of the Community. Its terms were set out in Annex I thereto. Article 9 requires the Commission to make further regulations relating to the classification of certain goods and to publish explanatory notes. Article 12 requires the Commission by regulation to adopt in each year a complete version of the Combined Nomenclature as amended since the previous year's version. 3. At all times material to this appeal the Combined Nomenclature was in the form annexed to the Commission regulation to which I have referred. Section 1 of Annex I contains certain general rules for the interpretation of the Combined Nomenclature. So far as material it is in the following terms: “Classification of goods in the Combined Nomenclature shall be governed by the following principles: “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 headings or notes do not otherwise require, according to the following provisions. [2...] 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 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 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 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. [4... 5...] 6. 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 requires otherwise.” 4. Section XVI of Annex I deals with amongst other goods “...Electrical Equipment; Parts thereof”
“Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or 85, then the whole falls to be classified in the heading appropriate to that function.” 5. Chapter 85 (which is the second chapter of Section XVI) covers “Electrical Machinery and Equipment and Parts thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of such articles”
“8525 Transmission apparatus for radio-telephony, radio-telegraphy, radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras; 8525 10 - Transmission apparatus... 8525 20 - Transmission apparatus incorporating reception apparatus.... [8525 20 10...] [8525 20 91...] 8525 20 99 - - - Other [8526 Radar apparatus....] 8527 Reception apparatus for radio-telephony, radio-telegraphy or radio-broadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock: [8527 12, 13, 19, 21, 29, 31 32, 39] 8527 90 - Other apparatus: 8527 90 10 - - For radio-telephony or radio- telegraphy, for use in civil aircraft - - Other: 8527 90 92 - - -Portable receivers for calling, alerting or paging 8527 90 98 - - -Other”
“These subheadings include apparatus consisting of all the elements required for transmission and reception, in one cabinet or housing. Such is the case, for example, with walkie-talkies, which contain the batteries or accumulators required for their operation, or with transmitter-receiver apparatus, the power supply unit of which would be separate and connected to the apparatus by cable only. These subheadings also include units in which the transmitter and receiver elements are located in different furniture units or housing, provided they constitute a functional unit. In order to be regarded as constituting a functional unit, transmitter-receiver apparatus must be installed near each other (for example, in the same premises or on the same vehicle) and have certain elements in common, such as the aerial.” 7. On12th February 2001 the Commission promulgated the Classification Regulation under Article 9.1 of the Council Regulation concerning the classification of certain goods in the Combined Nomenclature. It recited that: “Pursuant to the said general rules, the goods described in column 1 of the table annexed to the present Regulation must be classified under the CN codes indicated in column 2, by virtue of the reasons set out in column 3.” 8. The third item in the table relates to goods described as: “A product described as a baby-monitoring device, put up in a set for retail sale, consisting of - a transmitter for radio telephony, with a built-in microphone - a portable receiver for radio-telephony combined with a loudspeaker in a housing - two mains adaptors Both the transmitter and the receiver can operate using either batteries or mains adaptors The device serves to transmit noises made by a baby in the vicinity of the transmitter and is used to monitor babies with a range of roughly 300 metres.” 9. Such goods were given the CN Code 8527 90 98. Accordingly goods within that description would bear customs duty at the rate of 9.3%. The reason given in the third column for that attribution is: “Classification is determined by the provisions of General Rules 1, 3(c) and 6 for the interpretation of the Combined Nomenclature, and the wording of CN codes 8527, 8527 90 and 8527 90 98. Neither the transmitter nor the receiver gives the product its essential character.” 10. Thus the dispute between Tomy and HMRC is whether One-Way Monitors may be imported duty free as “portable receivers for calling, alerting or paging” under CN code 8527 90 92, as Tomy contends, or would bear duty at the rate of 9.3% as “other” goods under CN Code 8527 90 98, whether by force of the Combined Nomenclature as interpreted in accordance with the general rules or in consequence of the Classification Regulation.” “Classification of goods in the Combined Nomenclature shall be governed by the following principles: “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 headings or notes do not otherwise require, according to the following provisions. [2...] 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 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 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 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. [4... 5...] 6. 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 requires otherwise.” “Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or 85, then the whole falls to be classified in the heading appropriate to that function.” “8525 Transmission apparatus for radio-telephony, radio-telegraphy, radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras; 8525 10 - Transmission apparatus... 8525 20 - Transmission apparatus incorporating reception apparatus.... [8525 20 10...] [8525 20 91...] 8525 20 99 - - - Other [8526 Radar apparatus....] 8527 Reception apparatus for radio-telephony, radio-telegraphy or radio-broadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock: [8527 12, 13, 19, 21, 29, 31 32, 39] 8527 90 - Other apparatus: 8527 90 10 - - For radio-telephony or radio- telegraphy, for use in civil aircraft - - Other: 8527 90 92 - - -Portable receivers for calling, alerting or paging 8527 90 98 - - -Other” “These subheadings include apparatus consisting of all the elements required for transmission and reception, in one cabinet or housing. Such is the case, for example, with walkie-talkies, which contain the batteries or accumulators required for their operation, or with transmitter-receiver apparatus, the power supply unit of which would be separate and connected to the apparatus by cable only. These subheadings also include units in which the transmitter and receiver elements are located in different furniture units or housing, provided they constitute a functional unit. In order to be regarded as constituting a functional unit, transmitter-receiver apparatus must be installed near each other (for example, in the same premises or on the same vehicle) and have certain elements in common, such as the aerial.” “Pursuant to the said general rules, the goods described in column 1 of the table annexed to the present Regulation must be classified under the CN codes indicated in column 2, by virtue of the reasons set out in column 3.” “A product described as a baby-monitoring device, put up in a set for retail sale, consisting of - a transmitter for radio telephony, with a built-in microphone - a portable receiver for radio-telephony combined with a loudspeaker in a housing - two mains adaptors Both the transmitter and the receiver can operate using either batteries or mains adaptors The device serves to transmit noises made by a baby in the vicinity of the transmitter and is used to monitor babies with a range of roughly 300 metres.” “Classification is determined by the provisions of General Rules 1, 3(c) and 6 for the interpretation of the Combined Nomenclature, and the wording of CN codes 8527, 8527 90 and 8527 90 98. Neither the transmitter nor the receiver gives the product its essential character.”
“One-Way Monitors 11. The VAT and Duties Tribunal heard oral evidence from the designer of the One-Way Monitors Tomy wished to import, Mr Perran Newman. He demonstrated how they worked. In addition there was evidence from Mr Gaikwad a former policy adviser to HMRC called by Tomy and an expert witness, Mr Bevan Clues, called on the behalf of HMRC. In the light of all that evidence the Tribunal described the various One-Way Monitors in the following terms: (1) The [One-Way Monitors] comprise three models of baby monitor: the Walkabout Classic, the Walkabout Digital and the Walkabout Premier, to which we shall refer as the Classic, Digital and Premier. All three comprise a baby unit that contains a microphone which picks up the baby's sound and transmits it by radio-telephony to a parent unit that receives the radio signals and reproduces them via a built-in loudspeaker. All three also have a bar graph visual display with increasing numbers of lights illuminating as the volume of the sound increases, the first five lights being green and the last three red, which can be used at the same time as, or instead of, the sound. The lights might typically be used if the parents were watching television and might not hear the sound. The [One-Way Monitors] can be set to output sound only or sound plus lights; on the Classic the sound can be muted so that only the lights show, and the Digital and Premier have a volume control. All three enable two different channels to be selected with a view to minimise interference from other similar products in the vicinity. Both units of all the [One-Way Monitors] have an on/off switch with a light showing when it is on. The parent unit is portable. Both units may be used with batteries or from the mains. (2) The Classic model transmits the sound continuously (but the sound can be muted). The Digital and Premier [One-Way Monitors] have voice activation (“VOX”) under which nothing is transmitted until the sound reaches one of two pre-determined settings of 55 and 65 dBA, after which it transmits the sound continuously so long as the sound continues. At the higher setting the baby will be crying loudly before transmission of sound begins. (3) The Digital and Premier [One-Way Monitors] have the following additional features: a night light on the baby unit; detection that the baby unit is transmitting; a temperature display of the temperature in the baby's room which is displayed either digitally on the Premier [One-Way Monitors] or on the moving light display for the Digital [One-Way Monitors] (including an alarm if the temperature falls outside set limits); a battery low signal for each unit (with different alarm signals depending on which unit has the low battery); and an identifying code setting enabling 16 different combinations to be set to match the other unit so that the parent unit does not receive transmission from another unit in the vicinity set to the same channel. Each of these features give a different signal so that the nature of the problem can be identified. The temperature and low battery signals operate by telemetric signals, by which signals pass between the units but are inaudible. The Premier has a compact parent unit which can be separated from the rest of the parent unit and carried by the parent. When this is removed only the sound can be used as the lights are on the remainder of the unit.”
“12. Tomy relies on three specific aspects of these monitors. First, in the case of all three models sound may be muted with the result that only the flashing light shows. Second, the Digital and Premier models are sound/voice activated so that sound below a particular level is not transmitted. Third, the Digital and Premier models also transmit additional information such as the ambient temperature of the baby unit. As will be seen Tomy contends that the consequence of these additions is that the Classification Regulation is inapplicable to these One-Way Monitors. 13. For completeness I should mention that there are two-way baby monitors on the market. In those cases both baby and parent unit both transmit and receive. Further there is a separate classification regulation (Commission Regulation (EC) 646/2001) which deals with them. It classifies them as within CN Code 8525 20 99. This appeal is not directly concerned with them.”
“20. General Rule 1 states that “for legal purposes, classification shall be determined according to the terms of the headings...and any relative...section notes...”
“28. ….It is not suggested that the specific purpose of One-Way Monitors is for the baby to 'call' or 'page' anyone. Nor is the fact that they may have the effect of 'alerting' one at the parent unit end sufficient. Counsel for Tomy submits that it is the specific or 'very' purpose of One-Way Monitors to alert those at the parent unit end. He relies on the conclusion of Mrs Farquharson in paragraph 25 that: “...at least the Digital and the Premier Products are receivers for calling, alerting or paging because effectively that is their main purpose. She did not, and she considers that other parents do not, in practice use the Products in order to be able to listen continuously to the baby, but in order to be alerted when the baby needs attention. Those Products are therefore a “receiver for calling, alerting or paging” because that is the purpose for which they are used in practice.” 29. That conclusion is disputed by counsel for HMRC. He contends that One-Way Monitors are listening devices such as a “bug”
“The Chairman does not consider that where the lower setting operates [Digital and Premier Models] and in all cases with the Classic that there is any calling, alerting or paging. Any sound is being transmitted and the parent has to decide whether to do anything. This goes beyond the act of making contact and so the receiver (since in heading 8527 we are concerned with the receiver) is not for calling, alerting or paging; it is mainly for other purposes. This is so even though he accepts that parents are likely in practice to use the Products, and in particular the Digital and Premier ones, so that they operate to alert them when the baby needs attention.” 30. This conclusion is criticised by counsel for Tomy. At the hearing he had relied on various Communications Dictionaries for the proposition that alert means “the indication of a change of state”
“27. That case concerned the correct classification of apparatus imported by Shimadzu comprising a data processor (which included a control panel, central processor, converter, electrical interfaces and electronic components) and a printer linked together by a cable. The relevant authority in Berlin considered them to be “apparatus for measuring...electrical quantities” within CN code 9030. Shimadzu objected to this classification on the ground that the apparatus was used in chromatography and was not intended for measuring electrical quantities. The court upheld the objection. It stated: “9. It should be noted that apart from instruments and apparatus for measuring or detecting radiations, Heading 9030 of the Combined Nomenclature only covers, according to its very wording, instruments and apparatus for measuring or checking electrical quantities. “9. It should be noted that apart from instruments and apparatus for measuring or detecting radiations, Heading 9030 of the Combined Nomenclature only covers, according to its very wording, instruments and apparatus for measuring or checking electrical quantities. 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, 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.” ”