EU Court Judgment May Add 6.5 Percent Customs Tariff Burden for Parts/Accessories of Medical Devices
A recent case at the European Court of Justice can have important consequences for imports of accessories and disposables for medical devices, as these may be subject to a customs tariff of 6.5 percent.
The Unomedical case at the European Court concerned the import of urine drainage bags for catheters and drainage bags for dialysers into Denmark. A dispute ensued between the importer, Unomedical, and the Danish customs authorities about whether the types of bags concerned were subject to the 6.5 percent customs tariff for “plastics and articles thereof” under Council Regulation (EEC) No 2913/92 or to no tariff as “parts” and/or “accessories” for catheters or dialysers as referred to in Chapter 90 of the Combined Nomenclature (CN), a Regulation that customs authorities use to classify imported products for the purpose of deciding what tariff to impose.
The Danish judge decided to refer the case to the European Court of Justice for a preliminary ruling on the correct interpretation of EU law on this point. The European Court of Justice rendered a judgment in this case on 16 June that may have important consequences for the cost and pricing of devices by handing down a judgment that may significantly increase the customs tariffs burden for medical devices imported into the EU — a significant increase because medical devices and their accessories are normally subject to a customs duty zero rate.
The European Court found that the CN:
“must be interpreted as meaning that a dialysis drainage bag, manufactured from plastic, which is specially designed for, and can be used only with, a dialyser (artificial kidney), had, between May 2001 and December 2003, to be classified under subheading 3926 90 99 of the Combined Nomenclature as ‘plastics and articles thereof’ and that a urine drainage bag, manufactured from plastic, which is specially designed for, and therefore can be used only in connection with, a catheter had, during the same period, to be classified under subheading 3926 90 99 of the Combined Nomenclature as ‘plastics and articles thereof’.”
The reason for the bags not being recognized as parts or accessories of medical devices that would entitle them to no customs tariff being imposed was that:
“those bags do not enable the instruments and apparatus to be adapted for a particular operation, nor do they increase their range of operations, or enable them to perform a particular service connected with their main function. A drainage bag attached to a catheter has the sole purpose of collecting liquid drained after the catheter itself has fulfilled its own function, which is to drain the urine present in the bladder. For its part, a drainage bag for a dialyser does not enable that apparatus to perform operations other than that for which it is designed, namely that of cleansing blood.”
This European Court judgment could have an impact on many companies importing medical devices and parts or disposables for such devices into the EU. Instead of the zero rate that applies to most medical devices, this judgment results in an increased customs duty burden of 6.5 percent.
The European Court’s interpretation can have an impact on future imports, but may also trigger Customs to initiate audits and raise assessments in respect of past imports, as the European Court judgment did not limit the consequences of its judgment in time. Although the judgment is limited to the facts of this case, Customs may try the argument on other device disposables, as well as other accessories. Therefore, it is recommended that importers of medical devices and parts review the CN classifications they declare to Customs. If in doubt, careful planning and/or relatively simple changes could be required to ensure the customs duty zero rate is applicable.