Case Update: Tax Appeals Tribunal Appeal No. E686 OF 2024

BASF East Africa Limited -vs- Commissioner of Customs and Border Control

In Summary: The commissioner erred by classifying an Isocyanate component usually reacted with a Polyol to form a Polyurethane, in the same Tariff classification as a Polyurethane. In other words, the rule on sets does not apply to goods intended for further industrial manufacture.

BACKGROUND

1. The Appellant imported a chemical product called Isocyanate ISO 145/8 (ISO 145/8). ISO 145/8 is usually reacted with a Polyol to form Polyurethane. Polyurethanes are polymers used to manufacture a range of products including foams.
2. The Appellant declared ISO 145/8 under H.S Classification 3824.99.90 (Chemical products and preparations of the chemical or allied industries, not elsewhere specified or included).
3. The Commissioner reclassified ISO145/8 to HS Code 3909.50.00 (Polyurethanes) on the basis that ISO145/8 was a component of a set to be used for manufacture of Polyurethanes.

ISSUE(S)

Whether the Respondent erred in reclassifying the Appellant’s imported product ISO 145/8 from HS Code 3824.99.90 to HS Code 3909.50.00 of the 2022 EAC/CET.

HELD

1. The Appellant through documentary, oral and physical evidence adduced evidence of the nature and composition of the product ISO 145/8.

2. The Respondent did not present any witness to fortify the averments made in its statement of facts with solid evidence to corroborate the same, with respect to the composition of ISO 145/8. That being the case the same remained as mere averments.

3. Tribunal was satisfied that the evidence adduced by the Appellant as regards the nature and composition of the product remained unrebutted.

4. The appropriate classification for ISO 145/8 was 3824.99.90: Other on the basis that the product was a mixture of two organic products not classified elsewhere in the HS Nomenclature, and the product was not a polyurethane.

5. By virtue of the Explanatory note to Rule 3(b) of the General Rules of Interpretation, the Rule on constituent sets did not apply to industrial raw materials or goods presented separately for evaluation.

DECISION

The Appeal succeeds and Respondent’s Review Decision set aside.

AUTHORITIES REFERRED TO

1. The East African Community Common External Tariff, 2022.

2. The World Customs Explanatory Notes (WCO Explanatory Notes).

3. Sai Pharmaceuticals Ltd vs. Commissioner of Customs & Border Control [2023] KETAT 976 (KLR).

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