Royal Courts of Justice
London WC2A 2LL
B e f o r e :
|VTECH ELECTRONICS (UK) PLC|
|THE COMMISSIONERS OF CUSTOMS & EXCISE|
for the Appellant
Mr David Anderson QC and Mr Owain Thomas (instructed by the Solicitor, HM Customs & Excise) for the Respondents
(SUBJECT TO EDITORIAL CORRECTIONS)
Crown Copyright ©
Mr Justice Lawrence Collins:
II Legal background
(a) By rule 1, classification is to be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the succeeding provisions.
(b) By rule 2(b), the classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.
(c) Rule 3 provides as follows:
"When by application of rule 2(b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:
(a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substance contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods;
(b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character in so far as this criterion is applicable;
(c) when goods cannot be classified by reference to 3(a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration."
(d) By rule 4 "Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin."
(e) By rule 6, rule 1 is applied mutatis mutandis to the classification of goods in the subheading of a heading.
IV Classification Regulations
"20. It should be borne in mind that a classification regulation is adopted … on the advice of the Customs Code Committee when the classification of a particular product is such as to give rise to difficulty or to be a matter for dispute.
21. It is thus not an abstract classification, since the purpose is to resolve the problem to which a particular product gives rise. But, as the Commission points out, the classification regulation has general implications, in so far as it does not apply to a given undertaking or to a particular transaction, but, in general, to products which are the same as that examined by the Customs Code Committee.
22. The classification regulation constitutes the application of a general rule to a particular case, and thus contains guidance on the interpretation of the rule which can be applied by the authority responsible for the classification of an identical or similar product."
But, he said, the approach adopted by a classification regulation for a particular product could not unhesitatingly and automatically be adopted in the case of a similar product: "On the contrary, as always, where reasoning by analogy is employed great care is called for." (para 24)
"Closer scrutiny is I consider justified in such cases, where the dispute is between headings or sub-headings whose contents is established at that higher level and which fall only to be interpreted for Community purposes, than where the Commission enjoys a fuller discretionary power, for example as regards the determination of the correct eight-digit sub-heading, which is a matter of Community law alone. In the former case…a regulation may be invalid by reason of its failure to comply with the Community's international obligations; in the latter it will not be invalid unless the classification was manifestly at odds with the CN."
"We have considered the definitions of 'toy' and 'game'… and have concluded that there is some overlap between the two. For example, a pack of Happy Family playing cards, or an electric car racing set with a competitive element, or a board game such as ludo or snakes and ladders, would come within the definition of a game, as in each case there is a contest played according to rules, success depending, in those cases, on skill and good fortune. But in our view, each of those products could also come within at least part of the definition of a toy as they are material objects for children or others to play with; they are playthings; and they are contrived for amusement rather than practical use. Thus, having considered the definitions, we have concluded that an object could come within the definition of a toy and also within the definition of a game; there will be toys which are not games, for example a teddy bear, and games which are not toys, for example a full-sized billiard table, but there will be products which could meet the definition of a toy and the definition of a game.
In our view the Learning Pad could come within the definition of both a toy and a game and so could be classified both under heading 9503 and heading 9504." (paras 43 and 44)
"The Smart Start Scholar…is an electronic toy or game for children aged 3 to 6. It consists of a box with a keyboard… it has a screen which lifts up, into which a card is inserted. It comes with 25 activity cards each with two sides. An electronic voice asks each of the questions on the card in turn and the answers are given by pressing a number on the keyboard, either being the number required for the answer or the number identified by a colour code on the card. The machine will go through the questions on the card and mark them…"
"It is used for a number of different functions such as beginning sounds, letter chain, beginning letters, missing letters, spelling, number chain, counting balancing act, addition, subtraction, reading the clock, matching, shapes, colours, ordering by size and sequential order, which could be described as games. It marks the number of correct answers given by the child so in that sense the child is playing against the machine. It could be used by two children answering successive questions, although it would not give separate scores, as…it is not designed for that purpose. We therefore conclude that it is a game."
"Classification is determined by the provisions of General Rules 1 and 6 for the interpretation of the Combined Nomenclature. Note 1p) to section XVI and the wording of CN-codes 9503, 9503 90 and 9503 90 32.
Even though most of the programs are in a two player mode and the correct answers are scored, the device cannot be regarded as a parlour game, but as an educational toy given the numerous in-built programs for learning."
IV Tribunal decision
"B. The Amazing Laptop Computer
This is a talking laptop-style, battery-operated, learning aid, with hard key QWERTY keyboard displaying upper and lower case letters. A segmented LCD screen displays up to eight characters. There are twenty-five built-in activities designed to develop skills in English, maths, logic, etc. There are four levels of difficulty to add challenge to activity play. Other features include 200 spoken words and sound effects and a demonstration facility. The product may be used by one or two players of ages from 4 to 7 years. Correct/incorrect answers given by the player(s) are signified by built-in LED lights and a score is given.
C. My Little Talking Computer
This is a talking, laptop-style, battery-operated, electronic learning aid with an alphanumeric keyboard and a full dot matrix LCD screen which provides clear animated pictures. There are 14 built-in activities designed to develop skills in letters and spelling, word games, numbers, counting, maths, music, etc. There are two skill levels of difficulty adding challenge to activity play. The article may be used by players of ages ranging from 3-6 years. The number of correct answers given by the players are marked and a score given.
D. The Talking Whiz Kid Platinum
This is a laptop-style, toy computer, made of plastic. It has 'Windows' style applications; 42 learning activities, including 8 word, 2 English, 11 mathematics, 5 trivia, 6 logic, 7 business/organiser functions and 2 music. It includes word processing, printing and a 75,000 word spell check. It includes a reading comprehension cartridge, a built-in calendar and memory storage. The graphics come up on a four-colour screen. The products talks with an English voice. There are six challenging levels.
E. My Computer Pal
This a talking, desktop-style, toy computer in purple plastic with multi-coloured keys and a QWERTY keyboard. The computer has an LCS screen. There are 26 interactive activities including 10 languages, 8 mathematics, 2 music and 6 games. My Computer Pal can be used in one or two user mode. The product comes packed with four games cartridges, a mouse and a mouse mat.
F. Spooky Adventures
This is presented in the form of a laptop computer, and has a ghost theme. It is coloured mostly in green and black plastic. It has on/off buttons, and LEC screen; QWERTY keyboard; volume and contrast control; glowing globe; secret draw and AC adaptor jack; demo button and activity selector button. It has several activities themed into six categories in the form of haunted rooms within a house: 9 English, 9 mathematics, 5 logic and 2 music. It comes complete with a mouse, a mouse mat, glow-in-the-dark stickers and a book of instructions. It is battery operated and is designed for children aged 5 years and upwards"
"IQ Builders Electronic Learning Toys aim to help you take advantage of the early years of your child's development. During their crucial first activities, children develop physical, mental and emotional skills, and just as importantly an attitude to learning itself. Parents can help their children throughout this important phase by letting IQ Builders guide them from basic to more advanced skills in a relaxed self-driven play environment."
V VTech's case
VI Commissioners' case
(a) The products cannot sensibly be classified by reference to rule 3(a). Neither heading provides a more "specific description"; and the circumstances envisaged in the second sentence do not apply here. Alternatively, classification as a toy is a more specific description of goods whose toy-like characteristics predominate.
(b) If for the purposes of rule 3(b) (the application of which is not limited to mixtures of different physical materials or components) the products are capable of being described as "mixtures" between a parlour game and a toy, their "essential character" is (as the Tribunal found) that of a toy.
(c) Rule 3(c), which is arbitrary in its application and should thus be viewed as an interpretative aid of last resort, therefore does not arise even on this alternative submission.
"The cases show that the European Court of Justice employs a limited number of principles and rules of interpretation. If the Tribunal applies the correct principles and rules of interpretation, the court will not normally interfere with the factual evaluation that it has carried out. In my view, this restraint on interference should be respected with particular vigour in cases where (as here) the factual assessment involves complex technical issues."
"it cannot be argued that the 'essential character' of the article within the meaning of Rule 3(b) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff is determined by the materials used. The essential character of the article is in this case determined by its intended purpose as a decorative lighting appliance regardless of the material used in its frame."