Recent Legal Rulings about Duty Suspension and 16:9 Desktop Displays in Europe

By Bob Raikes and Paul Butler – Meko, Ltd; Chris Connery,and Deborah Yang - DisplaySearch

(Customs duty regulations are a complicated issue. This article is intended as a general guide to the topic, but you should consult qualified legal advisers for particular advice on a specific case.)

Everyone in the supply chain for monitors in Europe, from brand to panel maker, is currently obsessed with one topic: the import duty for monitors. So I thought I’d give you some background to this long running story.

Back in December 1996, the members of the WTO signed the ‘IT Agreement’ which said that there should be no duty on information technology products. While TVs could have duty (currently 14% in Europe), monitors should not. That was fine while the difference between them was clear. TVs had video inputs, while monitors had VGA.

One PDP set maker decided to get around the law for TVs by making a separate tuner box with a DVI link between his screen and the tuner box thereby avoiding 14% duty on the whole display and only paying duty on the tuner box. Of course customs disliked this and immediately put in a regulation to treat PDPs with DVI as TVs. Customs law often works by looking for similarities, so what applied to a large PDPs also applied to a large LCDs. By extension, what applied to a large LCD also applied to a small LCD.  So customs started applying a 14% duty to monitors with DVI.

This caused uproar, but nobody was able to define with a simple single feature the difference between a TV and a monitor. Responding to political pressure, the Commission in January 2005 agreed to a duty suspension for monitors up to 19” with conventional aspect ratios even if they had DVI.

However, while the level of duty is a political issue, the classification of goods is a legal issue and some importers thought that they were being charged duty unfairly, so they started legal processes to appeal against the classification decisions. Unfortunately, the legal process was slow.

In the meantime, EICTA, a trade association that is recognized by the EU as the representative of the industry in these discussions, made a series of proposals that were designed to try to separate monitors from TVs based on a range of features including dot pitch, aspect ratio etc.

The first duty suspension ran out at the end of 2008, so the EU commission made new proposals to extend the suspension.  To be technical these are part of the new regulation (Council regulation (EC) No 179/2009) issued on March 5, 2009 (but backdated to January 1) and have now been put into a legal binding.  This new duty suspension allows for the following finished-good products to be imported into Europe duty-free:

Color monitors using LCD technology, less than 22” (55.9 cm) with an aspect ratio of 1:1, 4:3, 5:4 or 16:10

Note that this duty suspension does not cover desktop monitors with a 16:9 aspect ratio, which are anticipated to be almost 50% of the production base for LCD monitor panel vendors for 2009!  So, as it stands as of this writing today (and as is being practically implemented at the actual port-of-entry) any new LCD monitors with a 16:9 aspect ratio and a DVI connector of any type would have the 14% duty imposed.  These include the following up-and-coming 16:9 size/resolutions:

• 15.6” 1366 × 768
• 18.5” 1366 × 768
• 20.0″ 1600 × 900
• 21.5″ 1920 × 1080
• 23.0″ 1920 × 1080
• 23.0″ 2048 × 1152
• 24.0″ 1920 × 1080

The recently amended EU duty suspension, which just extends to DVI-based monitors smaller than 22”, is not the end of the story, however.  In parallel efforts, various legal court cases were brewing, many of which have started to come towards a conclusion. The most advanced case has been the Kamino case, which was about a BenQ monitor. This case went all the way up to the European Court of Justice (ECJ) and was a defeat for the EU on several grounds in February 2009.

One defeat was on the extension of the original PDP regulation to small LCDs, which the court said was too big a stretch. A more important one was the second one. The regulations say that a display is a monitor if it is ‘of a kind solely or principally used with Automatic Data Processing equipment (ADP).’ The court said that the EU authorities had been really focused on the word ’solely’ but should also take into account ‘principally.’

The court also said that the EU should take into account the ‘design and use of the product.’

Despite this ruling, the EU has ratified and issued the revised duty suspension.

So if you are an importer, what can you do?

• If your monitor has a VGA connector only, you should be able to bring this in without duty.
• If your monitor meets the new duty suspension regulations, you can import with 0% duty.
• If customs charge 14% because your monitor does not meet the suspension terms, but you believe that you can show that it is a computer monitor, taking into account the comments from the ECJ, you should strongly consider appealing against the decision and should consider taking specialist advice. At the very least, this will make it easier to claim back duty if there is a later change in the regulations.