April 2011- ECJ rules on Classification of Set Top Boxes (STB)

27 April 2011

The European Court of Justice has finally resolved the classification of set top boxes with decoders and hard disk drives.

The joined cases of BSKyB (C289/09) and Pace (288/09) concerned the classification of set top boxes with recording functions (most readers will know these products as Sky Plus boxes). HMRC had argued that the STB should be classified under tariff heading 8521 which attracted customs duty at 13.9%. This position was based on the HS Explanatory Notes which although not legally binding do have persuasive authority.

The tax payer argued that the STB should be classified to tariff heading 8528, and more specifically 8528.71.13 which attracted 0% customs duty because the STB included a communications function. They argued that receiving and converting satellite signals was the STB primary function and that the Explanatory Notes had gone too far in changing the legal meaning of the tariff. The ECJ agreed with the tax payers reasoning after asking itself why a customer primarily bought the STB.

This case paves the way for sizeable classification reclaims for STB which incorporate recording functions and communications functions.

The case will also act as a catalyst for all STB importers to review their classification of products which include recording functions. Readers will note that the World Trade Organisation (WTO) recently found the EU to be in breach of its commitments under the Information Technology Agreement with regards to STB and the EU is also having to put in place a classification Regulation to bring itself in to line with its international commitments.

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