RMS Communications Ltd v Revenue & Customs

Customs duty � classification of 3 rd generation iPod Nano - whether principal function test applicable - yes

The appeal is brought against a decision of The Commissioners for Her Majesty�s Revenue and Customs (�HMRC�) dated 11 March 2008 to classify the 3 rd generation Apple iPod Nano (�the Nano�) to heading 8521 90 00 90 'video recording or reproducing apparatus, whether or not incorporating a video tuner') of Annex 1 ("the Combined Nomenclature" or "CN") of Council Regulation (EEC) No. 2658/87 of 23 July 1987, as amended ("the Tariff Regulation"), rather than to heading 8519 81 95 90 ('sound recording or reproducing apparatus').

The question for us to determine is whether or not the Nano should be classified under CN heading 8519 (as contended for by RMS Communications Ltd) or CN heading 8521 (as contended for by HMRC). At the material time, RMS Communications Ltd�s classification bore a duty at 2% while HMRC�s classification attracted a duty rate of 13.9%.

It seems to us that the questions at the crux of this appeal and the correct classification of the Nano for the purposes of customs duties are:

In essence we are looking at the question of the applicability of Note 3 to Section XVI of the CN (�Note 3�).� Under the test set out in Note 3, the Nano is to be classified as that device which performs its principal function. RMS Communications Ltd submits that the principal function of the Nano is that of an audio player. If the Nano�s principal function is indeed that of an audio player and Note 3 is the decisive provision, both parties accept that the Nano falls to be classified under heading 8519, rather than heading 8521.