The advance of modern technology creates product classes that could never have been envisaged by past legislators. In one case that illustrated the difficulties in keeping pace with change, the First-Tier Tribunal (FTT) was called upon to consider the import duty status of straps that are employed to attach smart watches to users’ wrists.
HMRC took the view that the straps were essentially pieces of plastic that should be subject to import duty.
However the distributor of the US-made products argued that the straps should be classified as part of a wireless network linking human wrists to a smart watch and, ultimately, to a smartphone. As such, they should have been zero-rated for import duty in the same way as other technological gadgets.
The distributor pointed out that the watches were part of a growing range of products referred to as wearable technology and could only be worn by attaching them with the patented straps, which were more than mere accessories. Without being in contact with users’ wrists, a number of the watches’ functions, including a heart rate monitor, accelerometer and gyroscope, would not function.
At the FFT the distributor’s appeal was rejected. The FTT noted that the straps were not essential to the electrical and mechanical operation of the smart watches. The watches were self-contained, fully functioning electrical machines and the straps were not a part of those machines.
The watches could be held manually against wrists, or attached by some other means, however inconvenient, and the essential characteristic of the straps was that of pieces of plastic.
Case: Apple Distribution International v The Commissioners for Her Majesty's Revenue and Customs. Case Number: TC05700