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	United Kingdom VAT & Duties Tribunals (Customs) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Customs) Decisions >> Paul v Revenue and Customs [2006] UKVAT(Customs) C00210 (23 February 2006) URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2006/C00210.html Cite as: [2006] UKVAT(Customs) C00210, [2006] UKVAT(Customs) C210

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CO00210

CUSTOMS DUTIES — motor car imported from USA — Bentley S3 Continental Flying Spur manufactured in 1964 — whether collector's item within tariff heading 97.05 or means of transport within heading 87.03 — BTI in heading 87.03 -– vehicle not satisfying tests laid down in Daiber — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

JULIAN SIBREE PAUL Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Colin Bishopp (Chairman)

Alban Holden

Sitting in public in Manchester on 23 January 2006

The Appellant appeared in person

Andrew O'Connor, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. In this appeal, Julian Paul seeks to challenge the Respondents' decision, set out in a Binding Tariff Information ("BTI") of 12 May 2005, that a motor car imported by him from the United States is properly classified in heading 87.03 of the Combined Nomenclature, attracting customs duty of 10 per cent and VAT at the standard rate. Mr Paul contends that the car should have been classified within heading 97.05; goods within that heading may be imported free of customs duty and are subject to a reduced rate of VAT. It was agreed that no other heading of the tariff might be relevant.
2. The car with which we are concerned is a Bentley S3 Continental Flying Spur, manufactured in 1964 and with coachwork by Mulliner. Mr Paul acquired it from a specialist dealer in the United States. The asking price for the car had been $125,000 but Mr Paul was able to negotiate a purchase at $76,538, inclusive of shipping. He attributed some of that reduction to the fact that the car has right-hand drive, a factor which depresses its value in the United States. The sum paid equates to £41,802 and Mr Paul's shipping agents (who also applied on his behalf for the BTI) declared the value of the car itself on importation at £39,000. Its cost, new, was £7681; it was sold in the United Kingdom and transported to the United States as recently as 2001. The car is built on a chassis and has a coach-built body; it is one of the last of the cars produced by Rolls Royce Motors in that style of construction, which was then abandoned in favour of monocoque construction. It is in its original condition and has been maintained to "show" standards. It is Mr Paul's intention to preserve the vehicle, and not to use it for ordinary transport purposes.
3. We take those facts from what we were told by Mr Paul, who represented himself at the hearing, and from the documents provided to us by the parties. They were not contentious. The Respondents were represented by Andrew O'Connor of counsel.
4. Heading 87.03 of the Combined Nomenclature, so far as material, reads:

"Motor cars and other motor vehicles principally designed for the transport of persons …"

5. Heading 97.05 covers

"Collections and collectors' pieces of zoological, botanical, mineralogical, anatomical, historical, archeaological, palaeontological, ethnographic or numismatic interest."

6. In neither case are the sub-headings which follow of any relevance. The Chapter Notes and the Combined Nomenclature Explanatory Note ("CNEN") to Chapter 87 do not assist, but the first paragraph of the CNEN to Chapter 95 deals with motor vehicles in the following way:

"1. This heading includes motor vehicles as collectors' pieces of historical interest if they meet the criteria set out in the judgment of the Court of Justice of the European Communities in Case No C-200/84, and therefore:

possess a certain scarcity value,

are not normally used for their original purpose,

are the subject of special transactions outside the normal trade in similar utility articles,

are of high value, and

illustrate a significant step in the evolution of human achievements or a period of that evolution.

In view of the fact that a motor vehicle is basically a utility article with a relatively short life, and subject to constant technical development, then the foregoing preconditions underlying the above judgments, in so far as they are not obviously contradicted by the facts, can be taken to apply in respect of:

vehicles in their original state, without substantial changes to the chassis, steering or braking system, engine, etc., at least 30 years old and of a model or type which is no longer in production,

all vehicles manufactured before 1950, even if not in running order."

7. Case C-200/84, on which that passage is based, is Erika Daiber v Hamptzollamt Reutlingen [1985] ECR 3363. Mr O'Connor argued that, although it is not entirely clear from its wording, the first four indents of paragraph 1 of the CNEN to Chapter 97 together constitute one test, and the fifth indent a second. That is, he said, apparent from the judgment in Daiber, the relevant paragraphs of which read:

"12. The two questions raise a single question concerning the interpretation of the terms 'collectors' pieces … of historical … ethnographic … interest' which are contained in heading 99.05 of the Common Customs Tariff, which reads in full 'collections and collectors' pieces of zoological, botanical, mineralogical, anatomical, historical, archaeological, palaeontological, ethnographic or numismatic interest'.

As the Court has repeatedly held, the decisive criterion for the customs classification of goods must be sought generally in their objective characteristics and qualities, as defined in the relevant heading of the Common Customs Tariff and in the notes to the Sections or Chapters.

Moreover, for the purpose of interpreting the Common Customs Tariff the court has consistently held that both the notes which head the Chapters of the Common Customs Tariff and the Explanatory Notes to the nomenclature of the Customs Cooperation Council are important means for ensuring the uniform application of the tariff and as such may be regarded as useful aids to its interpretation. For the purpose of interpreting the abovementioned tariff headings it is therefore necessary to take account not only of the wording and system of the Common Customs Tariff but also of the explanatory notes.

In addition, since it is a question of interpreting a heading allowing duty-free importation, it is necessary to take account of the purpose of the exemption. The exemptions in Chapter 99 of the Common Customs Tariff are intended to facilitate international trade in objects of cultural and educational value and that aim is decisive for the interpretation of the heading in question.

It is apparent from consideration of the first sentence of the text of heading 99.05, having regard to the various language versions of the Common Customs Tariff, that an item comes under that heading if it is suitable in itself for inclusion in a collection. The Danish, Dutch, English, French, German, Greek and Italian versions … all contain a word meaning 'collector' or 'collection'. That concept must be interpreted, in particular, in accordance with the principle that tariff classification must take place on the basis of the objective characteristics and properties of the goods in question.

It must be noted in the first place that the Customs Cooperation Council's explanatory notes to Chapter 99 ('Works of Art, Collectors' Pieces and Antiques') read 'most articles falling in the present chapter are either unique or at least exist in such very small numbers that they may not be freely available for purchase'. Moreover, although prima facie heading numbers 99.01 and 99.03 may be regarded as being concerned with unique items, the same is not true of the remaining headings of the chapter, which cover, for example, original engravings and lithographs, antiques and postage stamps not of current issue, which may not be unique.

It follows that in order to be suitable for inclusion in a collection within the meaning of heading no 99.05 an article must be relatively rare. Consequently, articles which have previously been mass-produced but which currently exist only in a limited number, so that they cannot be easily obtained, satisfy that requirement.

The aforesaid explanatory notes go on to state that articles coming under Chapter 99 'as a rule … are not dealt with in ordinary commercial transactions; some are, however, handled by a specialised trade (postage stamps, antiques, etc.). They are often of great value, out of all proportion to the value of their constituent materials'.

It follows that a further characteristic of the articles in question linked to the previous one, is that they are not traded on the ordinary market and may fetch a high price.

Finally, it must be observed that collectors' pieces are not normally used for their original purpose, although it cannot be ruled out that their functional capacity may remain intact.

However, for classification under heading no 99.05 it is not sufficient that an article should satisfy only the criteria for collectors' pieces set out above. It must also be of 'historical interest'. Articles which possess such interest, according to the Customs Cooperation Council's explanatory notes to heading no 99.05, include 'articles having a bearing on the study of the activities, manners, customs and characteristics of contemporary or earlier peoples. This category includes: mummies; sarcophagi; weapons; objects of worship; articles of apparel; articles used by primitive races; articles which have belonged to celebrities.'

Without its being necessary to distinguish between the terms ' historical' and 'ethnographic' it must be observed that neither the wording of the heading no 99.05 nor the explanatory notes confine themselves to the general history of nations. The term 'history' covers human development and achievement in all fields.

It follows that an article connected with human achievements, including those in the field of technology, may, because it marks a significant step in the evolution of human achievements or illustrates a period of that evolution, be of historical or ethnographic interest within the meaning of heading no 99.05 of the Common Customs Tariff.

Accordingly, the preliminary questions must be answered as follows:

Collectors' pieces within the meaning of heading no 99.05 of the Common Customs Tariff are articles which possess the requisite characteristics for inclusion in a collection, that is to say, articles which are relatively rare, are not normally used for their original purpose, are the subject of special transactions outside the normal trade in similar utility articles and are of high value.

Collectors' pieces which evidence a significant step in the evolution of human achievements or illustrate a period of that evolution are to be regarded as being of historical or ethnographic interest for the purposes of heading no 99.05 of the Common Customs Tariff."

8. Since that judgment was delivered, Chapter 99 has become Chapter 97, but without other amendment. It should also be mentioned that the Court was required in Daiber to consider an earlier version of the CNEN, which was in these terms:

"Most goods falling within this chapter are frequently [sic] unique specimens or at least exist in such small numbers that they are not freely available for purchase. They are not as a rule dealt with in ordinary commercial transactions but are handled by a specialised trade, and are often of great value, out of all proportion to the value of their constituent materials".

9. In Uwe Clees v Hauptzollamt Wuppertal (Case C-259/97) [1998] ECR I-8127 the Court expanded on its explanation in Daiber:

"13. Next, the Court has held that, in order for an article to be classified under the tariff heading at issue, it is not sufficient that it satisfies only the criteria for 'collectors' pieces', that is to say that it merely possesses the requisite characteristics for inclusion in a collection. It must also be of 'historical or ethnographic interest'. The Court has thus held that those two conditions are cumulative (see Daiber, paragraph 22).

With regard to the first condition, articles which meet the four criteria listed in the first point of the operative part of the judgment in Daiber possess the requisite characteristics for inclusion in a collection. The criteria set out in the first four indents of the first subparagraph of paragraph 1 of the Commission's explanatory notes, relating to that first condition, correspond to those laid down by the Court in Daiber.

As for the second condition, namely that the article in question must also be of historical or ethnographic interest, the Court observed in Daiber that the term 'history' covered human development and achievement in all fields (paragraph 23), including equally that of car design. Thus, motor vehicles, which relate to human achievements in that field of technology, may be of historical or ethnographic interest when they evidence a significant step in the evolution of human achievements or illustrate a period of that evolution (Daiber, second point of operative part).

The Commission has explained to the Court that the three criteria set out in the first indent of the second subparagraph of paragraph 1 of its explanatory notes, and referred to in the national court's question, namely that the vehicle at issue must be in its original state, more than 30 years old and of a model or type which is no longer being manufactured, relate solely to the second condition, concerning historical or ethnographic interest, and do not in any way affect the application of the four criteria laid down by the Court in the first point of the operative part of the judgment in Daiber, regarding the first condition …

… the fact a vehicle meets the three criteria set out by the Commission is not sufficient for it to be classified under heading 9705 of the CN. First, compliance with those three criteria merely establishes a presumption of historical or ethnographic interest, which is rebutted where the component authority establishes the vehicle's specific character is not in any way linked to a period in the past in the sense that the vehicle is not liable to evidence a significant step in the evolution of human achievements or illustrate a period of that evolution. Secondly, it is also necessary to meet the four criteria, referred to in the first point of the operative part of the judgment in Daiber, concerning the characteristics which a vehicle must possess in order to be included in a collection."

10. There was no dispute between the parties that Mr Paul's car was capable of being classified within heading 87.03: it is a motor car principally designed for the transport of persons. Mr Paul, if he is to succeed, must satisfy us that it is also capable of inclusion within heading 97.05 in order that he may take advantage of rule 3 of the General Rules for the Interpretation of the Combined Nomenclature. So far as material, it reads:

"3. When … 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.

(b) …

(c) when goods cannot be classified by reference to 3(a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration."

11. We should add that while the General Rules are binding (since they form part of the tariff itself, namely Annex 1 to Council Regulation (EEC) No 2658/87) the CNENs are provided only for guidance, and are not binding although, as the European Court of Justice has repeatedly said, it regards the CNENs as an important aid to interpretation of the tariff. A CNEN which is itself based on a judgment of the Court must obviously be given considerable weight, but in any event this tribunal is bound to follow the decisions of the Court in Daiber and Clees.
12. The Respondents accept that Mr Paul's car satisfies some of the criteria identified in Daiber and repeated in the CNEN: that the car is relatively rare (there are, it seems, fewer than 100 such cars surviving throughout the world); that it is not normally used for its original purpose (that is, it will be kept for display in shows and rallies, and not ordinarily used as a means of transport) and, in relation to the second paragraph of part 1 of the Note, that it is more than 30 years old, in its original state and of a model no longer in production. However, they say, it is not of high value, and it does not illustrate any significant human achievement. The officer undertaking the review which was conducted as the obligatory precursor to this appeal was not persuaded that cars of this kind were handled by a specialised trade, but seems to us clear that they are—certainly they cannot be bought from an ordinary second-hand car dealer—and Mr O'Connor did not pursue the point.
13. Quite what is meant by "high value" is not entirely clear. The phrase comes from the opinion of the Advocate General in Daiber, who used it more as an illustration of the consequence of rarity than as a criterion in its own right, although it has in fact become a discrete consideration because of its adoption by the Court in Daiber, without elaboration, and by the CNEN. The phrase might mean, as Mr Paul argued, no more than that the present day value of the article in question is significantly greater than its original cost. If that is right, the car clearly satisfies the requirement as its present value of £39,000 is several times its original price of £7681 but, as Mr O'Connor stressed, that comparison takes no account of the change in the value of money. If the original price of the car were adjusted for inflation, it would now amount to about £105,000, considerably more than its actual value and, perhaps but not necessarily coincidentally, the cost of a new car of similar quality today. In our view it is impossible, when assessing the relevance of the current value of a vehicle or other article, to disregard changes in the value of money since one is otherwise comparing not values but monetary amounts. It is only by disregarding changes in the value of money, or by comparing it with a run-of-the-mill car 40 years old, that one can conclude that this car has a high value; but those are false comparisons. We are satisfied that changes in the value of money must be taken into account and that Mr Paul's car does not meet the test.
14. It is true, as Mr Paul agreed, that the abandonment by its manufacturers of chassis and coachwork construction was a significant event but we are not persuaded that the abandonment of a manufacturing process amount to a "significant step in the evolution of human achievements…", to use the words of the CNEN. The significant step was the adoption of the new method; this car is no more than one of the last examples of the old method and does not, itself, illustrate any evolutionary step. We have concluded, therefore, that the car does not meet this criterion and that the presumption imported by the second subparagraph of paragraph 1 of the CNEN is rebutted.
15. Although we have seen only photographs of the car, we can agree with Mr Paul that it is a fine example of its type and that it will hold considerable attraction for collectors. But that is not enough; the extracts from the judgments of the Court of Justice which we have set out above show that the tests must be strictly applied, and considerably more than desirability is required. Mr Paul has not persuaded us that this car meets those tests, and the appeal must be dismissed. We make no direction in respect of costs.

COLIN BISHOPP

CHAIRMAN
Release Date: 23 February 2006

MAN/05/7044