TC09362 - [2024] UKFTT 001071 (TC)

The relevant law, so far as is material to the issues in this appeal, is as follows:

Section 8 of the TCBTA requires HM Treasury to make regulations establishing the UK Tariff. Section 8 of the TCBTA provides that:

“8 The customs tariff

(1)

The Treasury must make regulations establishing, and maintaining in force, a system which—

(a)

classifies goods according to their nature, origin or any other factor,

(b)

gives codes to the goods as so classified,

(c)

specifies the rate of import duty applicable to goods falling within those codes (whether by a formula or otherwise), and

(d)

contains rules for determining the amount of import duty applicable to those goods.

(2)

This system is referred to in this Part as the customs tariff.

(3)

The customs tariff may provide for the amount of any import duty applicable to any goods falling within any code to be determined by reference to either or both of the following—

(a)

the value of the goods, and

(b)

the weight or volume of the goods or any other measure of their quantity or size.

(4)

The customs tariff may include provision as to the meaning of any expression used in it.

…”

In fulfilment of this requirement, the Treasury has made the Customs Tariff (Establishment) (EU Exit) Regulations 2020 SI 2020/1430 (“the 2020 CT Regulations”). The 2020 CT Regulations, materially, provide that:

“1.

…

2.— Establishment of the customs tariff

(1)

The customs tariff is established as a system which consists of the following elements.

(2)

Element 1: the classification of goods according to their description as specified in the Goods Classification Table under the following divisions—

(a)

sections;

(b)

chapters within a section;

(c)

where applicable, sub-chapters;

(d)

headings within a chapter or sub-chapter; and

(e)

where applicable, levels of sub-headings within a heading.

(3)

Element 2: the codes ("commodity codes") set out in the Goods Classification Table as applicable to the goods as so classified.

(4)

Element 3: for goods falling within a commodity code set out in the Tariff Table, the rate of import duty specified in that table as applicable to those goods in a standard case ("the standard rate of import duty").

(5)

Element 4: for determining the amount of import duty applicable to those goods where the standard rate of import duty applies, the rules of calculation specified in Part Four of the Tariff of the United Kingdom under the heading of "General Rules".

(6)

In paragraph (4), "Tariff Table" means the table so named in Annex II of Part Three of the Tariff of the United Kingdom.

"The customs tariff" is defined in section 8(2) of the Taxation (Cross-border Trade) Act 2018.

3.— Rules of interpretation

(1)

For the purposes of determining the commodity codes within which goods most appropriately fall, the rules of interpretation contained in the following have effect—

(a)

Part Two (Goods Classification Table Rules of Interpretation) of the Tariff of the United Kingdom; and

(b)

notes to a section or chapter of the Goods Classification Table.

(2)

In paragraph (1), "commodity codes" has the meaning given by regulation 2(3).”

For present purposes, the material part of the UK Tariff is the “Goods Classification Table”, which is found in Annex I, Part 3 of the UK Tariff. The Goods Classification Table classifies goods using ten-digit “commodity codes”. The classifications in the Goods Classification Table are grouped together under “Sections”, “Chapters”, and “Headings”. The first two digits of a commodity code denote the Chapter concerned, and the next two denote the relevant Heading.

Of relevance to this appeal, commodity code “4015 9000 00” of the UK Tariff is associated with the following descriptions:

“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”

Commodity code “6113 0010 00” of the UK Tariff is associated with the following descriptions:

“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”

Commodity code 6113 0010 00 is defined with reference to Heading 5906, which in turn is defined with reference to Heading 5902. 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.”

The expression “rubberised textile fabric”is defined in Note 5 to Chapter 59 of the UK Tariff (as it stood at the time of the October 2022 ATaR). 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; ...

This heading does not, however, apply to plates, sheets or strip 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 effect of the final part of Note 5 is to exclude from the scope of Heading 5906 rubberised textile fabric “where the textile fabric is present merely for reinforcing purposes”.

Paragraph 3 of the 2020 CT Regulations provides that for the purposes of determining the commodity codes within which goods most appropriately fall, the rules of interpretation found in (i) Part 2 of the UK Tariff; and (ii) the Notes to a Section or Chapter of the Goods Classification Table have effect. The first six rules of interpretation found in Part 2 of the UK Tariff are the GIRs.

The GIRs which are of relevance to this appeal are as follows:

“PART TWO – GOODS CLASSIFICATION TABLE RULES OF INTERPRETATION

SECTION 1

Classification of goods in the Goods Classification Table shall be governed by the following Rules.

General Interpretive Rules

Rule 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.

Rule 2

(a)

Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.

(b)

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.

Rule 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, insofar 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.

The WCO has published the Harmonized System Explanatory Notes (“HSENs”), which are applicable when considering the interpretation of the various tariff “Headings”, and constitute a means of ensuring the uniform application of the Common Customs Tariff. The GIRs are identical to the HSENs. The HSENs which are relevant to this appeal provide that:

“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”

59.06

…

Exclusion Note (h) – Rubberised fabrics made up as described in Part (II) of the General Explanatory Note to Section XI (generally Chapters 61 to 63).

61.13

- Garments, made up of knitted or crocheted fabrics of heading 59.03, 59.06 or 59.07.

With the exception of babies’ garments of heading 61.11, this heading covers all garments made up of knitted or crocheted fabrics of heading 59.03, 59.06 or 59.07, without distinction between male or female wear.

...

It should be noted that articles which are, prima facie, classifiable both in this heading and in other headings of this Chapter, excluding heading 61.11, are to be classified in this heading (see Note 8 to this Chapter).

Furthermore, the heading does not include:

(a)

Garments made from the quilted textile products in the piece of heading 58.11 (generally heading 61.01 or 61.02). See Subheading Explanatory Note at the end of the General Explanatory Note to this Chapter.

(b)

Gloves, mittens and mitts, knitted or crocheted (heading 61.16) and other clothing accessories, knitted or crocheted (heading 61.17).”

In relation to the decision under appeal, and the jurisdiction of the FtT, FA 1994 provides that:

“13A— Meaning of relevant decision

(1)

This section applies for the purposes of the following provisions of this Chapter.

(2)

A reference to a relevant decision is a reference to any of the following decisions—

(a)

any decision by HMRC, in relation to any customs duty or to any agricultural levy of the [European Union], as to—

(i)

whether or not, and at what time, anything is charged in any case with any such duty or levy;

(ii)

the rate at which any such duty or levy is charged in any case, or the amount charged;

(iii)

the person liable in any case to pay any amount charged, or the amount of his liability; …”

“16.

Appeals to a tribunal

…

(5)

In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.”

The FtT has power to review decisions of HMRC in a number of administrative areas, which are specified in Schedule 5 FA 1994. These decisions are referred to, collectively, as “ancillary matters”. Section 16(4) FA 1994 confers a limited jurisdiction on the FtT to examine the reasonableness of ancillary decisions, but with very limited powers to give effect to such findings. An ATaR, however, constitutes a “relevant decision” pursuant to s 13A(2) FA 1994 because it is a decision by HMRC as to the rate at which customs duty is charged, and is not an ancillary matter. This means that the FtT has full appellate jurisdiction, pursuant to s 16(5) FA 1994.