medicaldeviceslegal

And now for something completely different: customs tariffs. Dry stuff, but it makes all the difference for the price of the device. Indeed, ‘parts’ and/or ‘accessories’ under heading 9018 of the Combined Nomenclature (“CN”), or ‘articles of plastics’ under heading 3926 of the CN, that is the question. Baffled?

The case at the European Court concerned 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 over the question whether the types of bags concerned were subject to the 6.5% 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 CN, an EU regulation that customs authorities use to classify all products for the purpose of deciding what tariff to impose. The European Court of Justice has rendered a judgment on 16 June that may have important consequences for the cost and pricing of devices by handing down a judgment in the Unomedical case 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 exempted from customs tariffs.

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 seen as parts or accessories of medical devices 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 reasoning does not convince me, as the reasoning is completely dissociated from the regulatory argumentation (see MEDDEV 2.1/1, p. 7) that would make the bags accessories or parts of medical devices and subject them to the rigorous safety and quality requirements of the Medical Devices Directive:

“The definition of ‘accessory’ requires that the accessory is specifically intended by the manufacturer of the accessory to be used together with a device. The intended use of the accessory must be such as to enable a device to be used in accordance with its intended use. Therefore a product can only become an accessory to a medical device if the manufacturer of such a product establishes an intended use in conjunction with one or several medical devices.”

Apparently the argumentation for whether something is an accessory or part can be completely different depending on whether the authorities can make some extra money by imposing customs tariffs or companies must put place safe medical devices on the market. This feels wrong.

Regardless however of what we think of the outcome and the reasoning, this European Court judgment is expected to have an impact on all 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%. 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 a European Court judgment establishes the law as it always has been and the court did not limit the the consequences of its judgment in time as the European Court may do. Although the judgment is limited to the facts of this case, Customs will likely try the argument on other device disposables as well as other accessories, so importers should beware and prepare.