Hasbro European Trading BV v Revenue & Customs, Court of Appeal - Civil Division, May 25, 2018, [2018] EWCA Civ 1221

Resolution Date:May 25, 2018
Issuing Organization:Civil Division
Actores:Hasbro European Trading BV v Revenue & Customs
 
FREE EXCERPT

Neutral Citation Number: [2018] EWCA Civ 1221

Case No: A3/2016/4733

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE UPPER TRIBUNAL

(TAX AND CHANCERY CHAMBER)

Judge Timothy Herrington and Judge Ashley Greenbank

[2016] UKUT 408 (TCC)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 25/05/2018

Before :

LORD JUSTICE PATTEN

LORD JUSTICE LEWISON

and

LORD JUSTICE NEWEY

- - - - - - - - - - - - - - - - - - - - -

Between :

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

Mr Laurent Sykes QC (instructed by Hasbro Legal Department) for the Appellant

Mr John Brinsmead-Stockham (instructed by the General Counsel and Solicitor to HM Revenue and Customs) for the Respondents

Hearing date: 9 May 2018

- - - - - - - - - - - - - - - - - - - - -

Lord Justice Newey:

  1. This case concerns the classification of products known as ``Beyblades''. The appellant, Hasbro European Trading BV (``Hasbro''), contends that Beyblades are correctly classified as ``articles for ... table or parlour games'' under heading 9504 of the Combined Nomenclature (``CN''). In contrast, HM Revenue and Customs (``HMRC'') maintain that Beyblades should be classified as ``other toys'' under heading 9503, and the First-tier Tribunal (``the FTT'') (Judge Guy Brannan and Ms Elizabeth Bridge) and the Upper Tribunal (``the UT'') (Judge Timothy Herrington and Judge Ashley Greenbank) each agreed. However, Hasbro now challenges that view in this Court.

  2. The issue matters because, if Beyblades fall within heading 9504, they can be imported into the European Union (``the EU'') free of customs duties. If, on the other hand, heading 9503 applies, Beyblades are liable to ad valorem customs duties of 4.7%.

    Beyblades

  3. A Beyblade is a form of spinning top set in motion by means of a rip-cord powered launcher. They are designed to be used for ``head-to-head'' battling in which the winner of a game is the person whose Beyblade is the last one spinning.

  4. Beyblades are intended to be launched into a bowl-shaped arena called a ``Beystadium'' and, while they are sold on their own, their packaging typically states, ``only use Beyblades with a Beystadium (sold separately)''. Beyblades can potentially be used without a stadium (for example, in a cardboard box or on a desk or table), but the FTT thought that such use would have ``limited amusement value compared with their use in a Beystadium which induced the Beyblades to come into contact with each other'' (paragraph 25 of the decision).

  5. This appeal is concerned only with Beyblades sold alone. There is no dispute that Beystadiums are appropriately classified under heading 9504.

    The framework

  6. The legal background was helpfully summarised by Henderson J in Commissioners of Revenue & Customs v Flir Systems AB [2009] EWHC 82 (Ch), drawing on the judgment of Lawrence Collins J in VTech Electronics (UK) plc v Commissioners of Customs & Excise [2003] EWHC 59 (Ch). Henderson J said this:

    ``7 The EU is a contracting party to the International Convention on the Harmonised Commodity Description and Coding System, generally known as `the Harmonised System'. The Convention requires that the tariffs and nomenclatures of contracting states conform to the Harmonised System, and all contracting states therefore use the headings and sub-headings of the Harmonised System. The system is administered by the World Customs Organisation in Brussels, which publishes explanatory notes to the Harmonised System known as `HSENs'.

    8 At Community level, the amount of customs duties on goods imported from outside the EU is determined on the basis of the Combined Nomenclature (`CN') established by Article 1 of Council Regulation 2658/87 and Article 20.3 of Regulation 2913/92. The CN is re-issued annually. It comprises three elements:

    (a) the nomenclature of the Harmonised System;

    (b) Community sub-divisions to that nomenclature; and

    (c) the preliminary provisions, additional section or chapter notes and footnotes relating to CN sub-headings.

    9 The CN uses an eight-digit numerical system to identify a product, the first six digits of which are those of the Harmonised System, while the two following digits identify the CN sub-headings, of which there are about ten thousand. Where there is no Community sub-heading, these two digits are `00'. There may also be ninth and tenth digits which identify further Community (TARIC) sub-headings, of which there about eighteen thousand.

    10 Apart from the HSENs to which I have already referred, the European Commission also issues Explanatory Notes of its own to the CN which are known as `CNENs'.

    11 The Court of Justice of the European Communities ... has repeatedly stated that the decisive criterion for the tariff classification of goods must be sought in their objective characteristics and properties as defined in the wording of the relevant heading of the CN and of the notes to the sections or chapters of the CN. The two categories of Explanatory Notes, that is to say the HSENs and the CNENs, are an important aid to the interpretation of the scope of the various tariff headings, but do not themselves have legally binding force. The content of the Explanatory Notes must therefore be compatible with the provisions of the CN, and cannot alter the meaning of those provisions. See, for example, Case C-495/03 Intermodal Transports BV v Staatssecretaris van Financien, [2005] ECR I-8151, at paragraphs 47 and 48.

    12 Part 1 of the CN contains at Section 1A the General Rules for the Interpretation of the CN. These General Rules are known as `GIRs'. Unlike the Explanatory Notes, they have the force of law (see Vtech at paragraph 16).''

  7. So far as relevant, the GIRs provide as follows:

    ``Classification of goods in the Combined Nomenclature shall be governed by the following principles:

  8. At the relevant time, HSENs in respect of the GIRs said this as regards GIR 3(a):

    ``(III) The first method of classification is provided in Rule 3 (a), under which the heading which provides the most specific description of the goods is to be preferred to a heading which provides a more general description.

    (IV) It is not practicable to lay down hard and fast rules by which to determine whether one heading more specifically describes the goods than another, but in general it may be said that:

    (a) A description by name is more specific than a description by class (e.g., shavers and hair clippers, with self-contained electric motor, are classified in heading 85.10 and not in heading 84.67 as tools for working in the hand with self-contained electric motor or in heading 85.09 as electro-mechanical domestic appliances with self-contained electric motor).

    (b) If the goods answer to a description which more clearly identifies them, that description is more specific than one where identification is less complete.

    Examples of the latter category of goods are:

    (1) Tufted textile carpets, identifiable for use in motorcars, which are to be classified not as accessories of motor cars in heading 87.08 but in heading 57.03, where they are more specifically described as carpets.

    (2) Unframed safety glass consisting of toughened or laminated glass, shaped and identifiable for use in aeroplanes, which is to be classified not in heading 88.03 as parts of goods of heading 88.01 or 88.02 but in heading 70.07, where it is more specifically described as safety glass....''

  9. The particular headings of the CN that are of importance in the present case are both to be found in chapter 95, ``Toys, games and sports requisites; parts and accessories thereof''. Heading 9503 reads:

    ``Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carriages; dolls; other toys; reduced-size (`scale') models and similar recreational models, working or not; puzzles of all kinds''.

    Heading 9504 is in these terms:

    ``Video game consoles and machines, articles for funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment''.

  10. The HSENs relating to heading 9503 said this during the material period:

    ``(D) Other toys.

    This group covers toys intended essentially for the amusement of persons (children or adults). However, toys which, on account of their design, shape or constituent material, are identifiable as intended exclusively for animals, e.g., pets, do not fall in this heading, but are classified in their own appropriate heading. This group includes:

    All toys not included in (A) to (C). Many of the toys are mechanically or electrically operated.

    These include:

    ...

    (xix) Hoops, skipping ropes, diabolo spools and sticks, spinning and humming tops, balls (other than those of heading 95.04 or 95.06) ....''

    The Tribunal proceedings

  11. Hasbro argued before the FTT that Beyblades fell only under heading 9504 and were not covered by heading 9503. The FTT decided otherwise, concluding that Beyblades ``fall within both Heading 9503 `Other toys' and Heading 9504 `articles for ... table or parlour games'' and, hence, that it had to ``apply the tie-breaker rules in GIR 3''. It went on (in paragraph 86 of its decision):

    ``In our view, GIR 3(a) provides a solution. We agree with [counsel for HMRC's] submission that Heading 9503 provides a more specific description of a Beyblade than Heading 9504. Heading 9503 specifically refers to `spinning...tops.' There is no doubt in our view that a Beyblade is a spinning top. We agree with the submission that, in contrast...

To continue reading

REQUEST YOUR FREE TRIAL