Trader leathered for inaccurate customs classification

The case of Laurence Supply Co vs HMRC highlights an appeal against a customs duty demand issued by HMRC to Laurence Supply Co (Leather Goods) Limited ('Laurence Supply'). The demand related to imports made by Laurence Supply of fashion handbags and purses (the products) from China between May 2014 and May 2017 in the sum of £603,548.58 for customs duty and import VAT.

Laurence Supply contended its goods were all made of either 'suedette' material, 'leatherette' or 'leather look' material. It argued that the ‘suedette’ products were classifiable under commodity code 4202 22 90 90 for the handbags and 4202 32 90 90 for the purses. Likewise, it contended that its handbags and purses made of 'leatherette' or 'leather look' material should come under the 'other material' commodity code (4202 29 00 00 for the handbags and 4202 39 00 for the purses), 
which attracted 3.7% duty. 

However, HMRC argued that the products exterior was made of 100% polyurethane and the correct classification should have been 4202 22 10 00 and 4202 32 10 00 for handbags and purses of sheeting of plastics, which attracted 9.7% duty.

Tribunal decision

The Tribunal decided on the issue as follows:

• The proper classification of a leatherette bag is 4202 29 00 00 which attracts duty of 3.7%. This was determined according to the General Rules for the Interpretation of the Combined Nomenclature ('the GRIs') and expert witness evidence available. It was decided that the outer surface of the leatherette bag was made of a combination of polyurethane and textile fibres.
• Laurence Supply failed to satisfy the burden of proof in respect of the goods within the demand except for the leatherette bag presented to the tribunal for classification. Laurence Supply failed to establish that all the goods in the demand looked like either the suedette or leatherette bag. 
• Therefore, the demand was only reduced to £601,484.22 by the value of one line item (£2,064.36) that related to the leatherette bag. 

Analysis

This case highlights the need for importers to take ownership of the importing process, by taking responsibility for their customs declarations and keeping accurate records. In addition, had the business been able to provide adequate product knowledge, they could have argued that their goods fell in the lower duty commodity code and hence reduced the amount of the demand.