TC09362 - [2024] UKFTT 001071 (TC)

The Wetsuits in the appeal before us are described as all-in-one wetsuits designed for surface water sports. The Wetsuits are intended to cover the upper and lower part of the body, reaching from the shoulders to the ankles and enveloping each leg separately, with long sleeves, round turtle style neckline, reinforcement on the knees and a small discreet key pocket to the side of the lower right leg. The Wetsuits also have a zip fastener to the front, across the upper chest. The company name appears to the right front and back chest area. The Wetsuits comprise of neoprene panels, with the majority covered on both sides with a knitted textile. There is an area to the front chest, and a small area to the lower back, where the neoprene is only covered by textile on the inside.

The parties have diametrically opposed views as to what the correct classification of the Wetsuits should be. It will be helpful to revisit the descriptions given to the classification of goods and products in the UK Tariff.

As considered earlier, HMRC’s position is that the Wetsuits fall to be classified under commodity code “6113 0010 00”. To recap, the descriptions associated with this commodity code in the UK Tariff are as follows:

“Section XI: Textiles and textile articles

Chapter 61: Articles of apparel and clothing accessories, knitted or crocheted

Heading 6113: Garments, made up of knitted or crocheted fabrics of heading 5903, 5906 or 5907

Subheading 6113 0010: Of knitted or crocheted fabrics of heading 5906.”

As commodity code 6113 0010 00 is defined with reference to Heading 5906, which in turn is defined with reference to Heading 5902, it is necessary to revisit the descriptions associated with Headings 5902 and 5906 in the UK Tariff are as follows:

“Section XI: Textiles and textile articles

Chapter 59: Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use

Heading 5902: Tyre cord fabric of high-tenacity yarn of nylon or other polyamides, polyesters or viscose rayon

Heading 5906: Rubberised textile fabrics, other than those of heading 5902.”

In further amplification of HMRC’s position, Mr Waldegrave submits that Heading 6113 of the UK Tariff applies because: (i) the double-sided panels on the Wetsuits constitute “rubberised textile fabrics”, as that expression is defined in the UK Tariff; and (ii) the double-sided panels make up the clear majority of the panels. He adds that the reason why the double-sided panels fall to be regarded as “rubberised textile fabrics” is because the textile fabric is not present solely for the purposes of reinforcing the neoprene - although it may extend the life of the wetsuit - but also to make a Wetsuits more comfortable. On the other hand, where textile is present on both sides of neoprene, it is to be regarded as present for purposes which go beyond mere reinforcement.

Mr Waldegrave submits that the correct method to adopt in classifying the Wetsuits is to, firstly, consider the material the product is manufactured from. He submits that the Wetsuits consist of neoprene panels (a synthetic, vulcanised rubber) covered on one or both sides with a “knitted textile”. Mr Waldegrave adds that, as a matter of ordinary language, a wetsuit clearly constitutes a “garment”. This, he submits is supported by the fact that, as used in the UK Tariff, the term garment has a broad meaning (see notes to Chapter 61 of the UK Tariff in which the term garment is used in relation to a wide range of clothing including ski suits, evening dress, and clothing for babies). Mr Waldegrave did not, however, refer to the Dictionary meaning of the word “garment”, but we are satisfied that nothing in this appeal turns on the definition of a garment.

Mr Waldegrave further submits that the second stage is to consider whether the Wetsuits are “made up” of a fabric of the kind referred to in Heading 6113. The expression “made up” is defined in Note g to Section XI and it includes (in Note g(f)) materials being “assembled by sewing, gumming or otherwise”.He then submits that the third stage is to consider whether the materials from which the Wetsuits are “made up” constitute “knitted or crocheted fabrics” falling within any of Headings 5903, 5906, or 5907. HMRC’s case is that the panels from which the Wetsuits are “made up” fall within Heading 5906, which refers to “rubberised textile fabrics, other than those of heading 5902”. The meaning of “textile fabric” is given in Note a to Chapter 59. This provides that the expression:

“applies only to the woven fabrics of Chapter 50 to Chapter 55 and heading 5803 and 5806... and the knitted or crocheted fabrics of heading 6002 to 6006.”

HMRC’s case is then that, in this appeal, the textile layers on the panels fall within Heading 6006, which applies to “other knitted or crocheted fabrics”. The expression “rubberised textile fabrics”is defined in Note 5 to Chapter 59 of the UK Tariff. As considered earlier, the definition is as follows:

“(a)

textile fabrics impregnated, coated, covered or laminated with rubber:

- weighing not more than 1,500 g/m2; or

- weighing more than 1,500 g/m2 and containing more than 50% by weight of textile material;

...

(c)

fabrics composed of parallel textile yarns agglomerated with rubber, irrespective of their weight per square metre.

This heading does not, however, apply to plates, sheets, or strips of cellular rubber, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 40), or textile products of heading 5811.”

The commodity code which the Appellant contends applies to the Wetsuits is “4015 9000 00”. The descriptions associated with this commodity code in the UK Tariff are as follows:

“Section VII: Plastics and articles thereof; rubber and articles thereof

Chapter 40: Rubber and articles thereof

Heading 4015: Articles of apparel and clothing accessories (including gloves, mittens and mitts), for all purposes, of vulcanised rubber other than hard rubber

Subheading 4015 9000: Other”

In essence, the Appellant’s case is that the Wetsuits are made of “vulcanised rubber”.

Mr Starr’s position is, in summary, that the primary material used in the manufacture of the Wetsuits is “neoprene”, which is then covered on one side or both sides with textile. The textile covering the outer surface of the Wetsuits is for “reinforcement purposes” only as the neoprene has a propensity to tear. The optional textile covering on the inner surface exists to provide a degree of additional comfort and is not essential to the function of the Wetsuits. He submits that categorising the material composition of the Wetsuits as “rubberised textile” would be misguided. He further submits that rule 3(b) of the GIRs provides that articles of rubber with textile coverings must be classified according to their “essential character”.

Mr Starr submits that the term “essential character” is only used in conjunction with rule 3(b) of the GIRs and, further, that Note (3) to Heading 40.15 of the HSENs precludes classification of the Wetsuits under rule 1 and rule 6 of the GIRs. This, he submits, is because classification must relate to the material that enables the Wetsuits to fulfil their primary purpose; that is to keep the wearer warm in cold water. He also submits that it is the neoprene alone which performs this function. Therefore, the Wetsuits must be classified as “an article of apparel of vulcanised rubber”, under Heading 4015 of the UK Tariff.

Mr Starr relies on the decision by the then VDT in Sola Wetsuits in support of the Appellant’s position that the Wetsuits should be classified according to Heading 4015. In this respect, he submits that one must have regard to the final product, and not just the material that it is made up from, in determining the classification of the Wetsuits. In his written submissions (the Appellant’s Skeleton Argument), Mr Starr argues that the analysis starts and ends with Note (3) of Heading 40.15 of the HSENs. Whilst Mr Waldegrave considered Heading 40.15 of the HSENs, he does not address Mr Starr’s point on Note (3). We not, however, that by his own submissions, Mr Waldegrave’s position on behalf of HMRC is that the HSENs are relevant.

Mr Waldegrave submits that the outcome in Sola Wetsuits was as a result of the findings made by the VDT, at [52] to [54], as follows:

“52.

Nowhere other than in the Note 40.08 is a distinction made between single and double reinforcement. In the present case we find that the textile fabric is present merely for reinforcing purposes

…

53.

We do not accept that the Respondents' argument is reinforced by the inclusion of divers' suits in Chapter 61. The Appellant makes divers' suits as well as wetsuits and described the process as being very different from that involved in making wetsuits, which we accept.

54.

We have not sufficient information on the items in the BTIs to be persuaded that they are helpful, particularly given that the purpose of the fabric covering is not specified and in our view it is of the greatest importance in the present case that the sole purpose of the double-lining was for reinforcement on those areas where the suit was rubbed...”

Mr Waldegrave, therefore, submits that the material finding made by the VDT was that the purpose of the double-lining was for reinforcement. He further submits that such a finding cannot be made in the appeal before us.

Having considered the parties’ respective positions, we note that it is accepted by both parties that the Wetsuits comprise of a “mixture of materials” and cannot be defined by reference to only one of the materials used, subject to the provisions of the relevant Explanatory Notes. The Wetsuits are of more than one material or substance (being of neoprene rubber combined with knitted textile fabric). Taking the two Headings of the UK Tariff (i.e., 4015 and 6113) in sequential order, we are satisfied that Heading 4015 is the logical starting point.

Heading 4015 of the UK Tariff clearly refers to “Articles of apparel and clothing accessories (…), for all purposes, of vulcanised rubber other than hard rubber”. HMRC accept that the Wetsuits are “articles of apparel” and “vulcanised rubber”. This is not in issue between the parties. HMRC’s case is, essentially, that the Wetsuits constitute “knitted fabrics” but they do not dispute the fact that neoprene is also present.

The Chapter Note to Heading 4015 states that:

“Chapter notes

1.

Except where the context otherwise requires, throughout the classification the expression ‘rubber’ means the following products, whether or not vulcanised or hard: natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums, synthetic rubber, factice derived from oils, and such substances reclaimed.

2.

This chapter does not cover:

a.

goods of Section XI (textiles and textile articles) …”

We will return to the presence of textile fabrics in the Wetsuits later.

The additional Chapter Note to Heading 4015 states this:

“Additional chapter note

Where woven, knitted or crocheted fabrics, felt or nonwovens are present merely for reinforcing purposes, gloves, mittens or mitts impregnated, coated or covered with cellular rubber belong to Chapter 40 even if they are:

•

made up from woven, knitted or crocheted fabrics (other than those of heading 5906), felt or nonwovens impregnated, coated or covered with cellular rubber; or

•

made up from unimpregnated, uncoated or uncovered woven, knitted or crocheted fabrics, felt or nonwovens and subsequently impregnated, coated or covered with cellular rubber.”

We find that double-sided wetsuits, such as the Wetsuits in this appeal, are neither impregnated with rubber, or made up from unimpregnated fabrics covered with rubber.

We are satisfied that one cannot simply ignore the HSENs. Although the HSENs and are not legally binding, in Hasbro, at [18], Newey LJ (with whom Lewison and Patten LJJ agreed) stated that:

“There is no doubt but that explanatory notes can and should be taken into account when deciding whether an item is capable of being classified under a particular heading.”

And, at [28]:

“…HSENs plainly fall to be taken into account when considering the scope of a heading and, hence, whether goods are “prima facie classifiable under [it]” for the purposes of GIR 3(a), but that by no means implies that HSENs should be read into a heading.”

We agree with these propositions. The HSENs in relation to Heading 40.15 are expressed in the following terms:

“40.15

– Articles of apparel and clothing accessories (including gloves mittens and mitts), for all purposes, of vulcanised rubber, other than hard rubber

This heading covers articles of apparel and clothing accessories (including gloves, mittens and mitts) e.g., protective gloves and clothing for surgeons, radiologists, divers, etc., whether assembled by means of an adhesive or by sewing or otherwise obtained. These goods may be:

(1)

Wholly of rubber.

(2)

Of woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated with rubber, other than those falling in Section XI (see Note 3 to Chapter 56 and Note 5 to Chapter 59) ...

(3)

Of rubber, with parts of textile fabric, when the rubber is the constituent giving the goods their essential character”

Taking Notes (1) to (3) of Heading 40.15 in turn, it is clear that the Wetsuits are not “wholly of rubber”, given the textile fabrics included. Note (1) is not, therefore, applicable. In respect of Note (2), the Wetsuits clearly are not “of woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated with rubber, other than those falling in Section XI” (with reference to Note 5 to Chapter 59). Heading 5906 refers to “Rubberised textile fabrics, other than those of heading 5902”. While textile clearly is present on the Wetsuits, we have already observed that the effect of the final part of Note 5 of Chapter 59 is, however, to exclude from the scope of Heading 5906 rubberised textile fabrics “where the textile fabric is present merely for reinforcing purposes and textile fabrics of Heading 5811”. We shall return to the “reinforcement” point later.

In respect of Note (3) of Heading 40.15 of the HSENs, we are satisfied that the Wetsuits are of rubber, with parts of textile fabric, as the rubber is the constituent giving the Wetsuits their “essential character”. We find that there is considerable force in Mr Starr’s submission that one can end the enquiry with Note (3) of Heading 40.15 of the HSENs. Furthermore, we consider that the inner and outer textile layers are present merely for reinforcing purposes (see paras. 113 and 114 below) and, therefore, the Wetsuits are excluded from Chapter 59 by virtue of Note 5 and would fall to be characterised pursuant to Chapter 40. We are further satisfied that even if one is to approach categorisation by means of rule 3(b) of the GIRs (on the basis that commodity codes 4015 9000 00 and 6113 0010 00 are potentially equally applicable and in case we are wrong in respect of Note (3) of Heading 40.15 or the exclusion by virtue of Note 5 of Chapter 59), rule 3(b) clearly provides that:

“(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, insofar as this criterion is applicable.”

HMRC do not dispute that regard must be had to the “essential character” of the Wetsuits. We find that there is considerable force in Mr Starr’s submission that the essential character of the Wetsuits is to provide insulation for the wearer in colder water temperatures. This has not been challenged by HMRC. Such insulation is achieved by the neoprene (the rubber element) because of the manufacturing process that creates bubbles in the neoprene as the air bubbles are an effective insulator. We are, therefore, satisfied that the essential character of the Wetsuits is the neoprene rubber. As the neoprene provides the essential character of a wetsuit, the analysis under rule GIR 3(b) would, equally, result in categorisation of the Wetsuit under Heading 4015 (in particular 4015 9000 00).

Turning to Heading 6113 of the UK Tariff, the Section Notes of Heading 6113 provide that:

“Section notes

1.

This section does not cover:

…

ij. woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated with rubber, or articles thereof, of Chapter 40;

…

7.

For the purposes of this section, the expression ‘made up’ means:

…

f.

assembled by sewing, gumming or otherwise (other than piece goods consisting of two or more lengths of identical material joined end to end and piece goods composed of two or more textiles assembled in layers, whether or not padded);”

Whilst it was not disputed by the Appellant that the textile layers on the panels used to make the Wetsuits constitute “knitted fabric”, the Heading goes on to refer to “garments, made up of knitted or crocheted fabrics of heading…5906…”. In relation to Heading 5906 (and returning to the “reinforcement” point), we are satisfied that the knitted textile fabrics are there for reinforcement, and not to insulate. In this respect, it was accepted by the parties that a single-sided wetsuit - where the textile lining was on the inside - was properly considered to be categorised on the basis that the textile material was present merely for reinforcement and, therefore, fell outwith Heading 5906 (by virtue of Note 5 to Chapter 59); and fell to be categorised under Chapter 40 (4015 9000 00). We find that the same internal lining exists in the Wetsuits under consideration, and that there is simply a further external lining, which was to provide protection from abrasion and wear and tear to the external surfaces of the neoprene. This evidence was undisputed. Taken together, the internal fabric was merely for the purposes of reinforcement and that the outer textile covering was merely protective. We find that both textile layers, despite any comments to the contrary, were present merely for the purposes of reinforcement of the neoprene rubber.

Whilst the European Regulation sought to classify wetsuits under Heading 6113, the European Regulation is no longer binding on the United Kingdom pursuant to para. 1 of Schedule 7 to the TCBTA. It appears (from the arguments presented on behalf of HMRC) that HMRC’s consideration started, and ended, with the European Regulation. The Commission considered that the panels with fabric on both sides fell within Heading 5906 because the presence of textile fabric on both sides meant that it had a function beyond that of mere reinforcement. It is pertinent to note, however, that the Commission considered that, prima facie, the wetsuits could be classified under both Heading 6113 and Heading 4015, resulting in the Commission resorting to the tie-breaker rule (i.e., rule 3(b) of the GIRs).

Having considered all of the evidence and submissions, cumulatively, we are satisfied that the logical Heading of the UK Tariff under which to classify the Wetsuits is Heading 4015. Consequently, therefore, commodity code 4015 9000 00 applies. This is because the major component of the Wetsuits is the neoprene and the textiles only serve the purposes of reinforcement. The metrics of the Wetsuits indicate that the neoprene is greater by volume and weight in order to provide insulation. This is not a simple measurement of ratio, but is an illustration of the essential character; namely insulation achieved by the neoprene and not the textiles. We further accept that Note 40.08 of the HSENs is not applicable, not least because in the Appellant’s case the rubber has been further worked and, therefore, it is irrelevant. It is, clearly, necessary to have regard to the final product.

Whilst we consider Sola Wetsuits to be persuasive, we hold that categorisation of the Wetsuits falls under Heading 4015 of the UK Tariff, by reason of Note (3) of Heading 40.15 of the HSENs.