Appeal court agrees with Sars against Samsung

The Supreme Court of Appeal (SCA) recently had to decide whether a Samsung Galaxy S7, commonly referred to as a smartphone, should be classified under “telephones for cellular networks” or “machines for the reception of voice, images or other data”.

The relevance of this classification was to determine the correct customs duty that would be levied on importation.

Samsung, which contended that the smartphone should be classified under “machines for the reception of voice, images or other data”, was appealing the high court judgment that had dismissed Samsung’s appeal against the South African Revenue Service’s determination that the smartphone should be classified under “telephones for cellular networks”.

The SCA, in turn, dismissed Samsung’s appeal with costs.

South Africa is a contracting party to the International Convention on the Harmonised Description and Coding System, developed by the World Customs Organisation (WCO), comprising more than 5 000 commodity groups.

The harmonised system is designed to also incorporate products still to be invented and manufactured. Each classification in the harmonised system has a unique code and each digit of the code represents an explanatory headline.

The objective characteristics and properties of an item will determine the tariff classification.

The judgment called for judicial interpretation.

Should “telephones for cellular networks” be interpreted as one composite phrase, or should “telephones” and “cellular networks” be separately interpreted?

The SCA decided that the correct approach is to “give meaning to the expression ‘telephones for cellular networks’ as a single concept” and SCA concluded that the objective characteristics of the Samsung Galaxy S7 demonstrate it is a telephone facility network.

It is small enough to be carried in the hand, has a high-resolution touch screen, a speaker and a microphone, slots for the insertion of a SIM card to operate as a telephone and communicate on a cellular network, and electronic keypads and software which enable the user to make and receive telephone calls.

The SCA further noted that the smartphone is still a telephone and it is “an advanced telephone following the natural progression of rapid technological advancement”.