Tribunal Rules on Classification of Imported Figures in Star-Images Enterprises Ltd Case

Citation: [2024] UKFTT 50 (TC)
Judgment on

Introduction

In the case of Star-Images Enterprises Ltd v The Commissioners for HM Revenue and Customs, the UK First-tier Tribunal (Tax Chamber) considered an appeal against the classification of various imported items for customs duty purposes. Central to the decision was the correct classification under the Combined Nomenclature (CN) of the Harmonized System (HS) and the application of the General Interpretative Rules (GIRs) for tariff classification.

Key Facts

Star-Images Enterprises Ltd, the appellant, contested the classification of 46 items, which HMRC initially classified under different commodity codes resulting in a chargeable customs duty. Crucial to the dispute was the classification of figures representing human beings versus non-human creatures, the role of ‘backstory’ in classification, and the classification of items put up in sets or outfits.

The Tribunal’s analysis rested on several legal principles:

  1. Objective Characteristics for Classification: As per established legal precedent, such as in the cases of BAS Trucks BV v Staatssecretaris van Financien (C-400/05) and the CJEU decision in Farfalla Fleming v Hauptzollamt München-West (Case C-228/89), the legal test for classification of goods is based on their objective characteristics and properties, not on factors like the product’s backstory or intended use, unless those characteristics are inherent to the product.

  2. Hierarchical Application of GIRs: GIRs must be applied in a hierarchical manner, as advocated in the case law like Uroplasty v Inspector van de Belastingdienst (Case C-514/04). GIR 1 and GIR 6 require that the classification of goods in the subheadings be based on the terms of those subheadings and related notes, with GIR 3(b) applying in cases where goods cannot be classified under a specific heading.

  3. Accessories and Sets Determination: The application of Note 3 to Chapter 95 of the CN was pivotal in determining whether packaged items fell into the category of ‘parts and accessories’ or ‘sets’. The decision in Build-A-Bear Workshop UK Holdings Ltd v HMRC (BaB CA) clarified that Note 3 requires a factual enquiry about the suitability for use of particular parts and accessories and is applicable at both heading and subheading levels.

  4. Statuettes and Ornamental Articles: For an item to be classified as a statuette, it must be established that the decorative or ornamental value of an item outweighs its recreational function, as assessed on the basis of the item’s objective characteristics and properties.

Outcomes

The Tribunal made a series of classifications based on these legal principles. Items that were deemed to have human physical characteristics were generally classified under commodity code 9503 00 21 90 (Dolls representing only human beings). Those with non-human physical characteristics were classified under code 9503 00 49 90 (Non-human toys). Accessories that could be used solely or principally with the main figure were not considered to turn figures into sets, and packed items with no independent play value did not alter the classification from ‘dolls’ to ‘sets’.

Conclusion

The Tribunal’s decision in Star-Images Enterprises Ltd vs. The Commissioners for HM Revenue and Customs underscores the importance of applying objective characteristics and legal precedents when classifying items for customs duty. The ‘backstory’ of an item is not a relevant factor in classification unless it is inherently reflected in the physical characteristics of the product. The clarity provided in this case, particularly the application of Note 3 to Chapter 95, assists UK legal professionals in understanding the correct approach to tariff classifications within the complexities of the Combined Nomenclature.