CH/2002/APP/0374
[2003] EWHC 59 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL

Wednesday, January 29, 2003

Before
MR JUSTICE LAWRENCE COLLINS

Between
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VTECH ELECTRONICS (UK) PLC
											Appellant
and

THE COMMISSIONERS OF CUSTOMS & EXCISE
											Respondents

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Mr David Vaughan QC and Ms Marie Demetriou (instructed by Garretts) 
for the Appellant

Mr David Anderson QC and Mr Owain Thomas (instructed by the Solicitor, HM Customs & Excise) for the Respondents
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JUDGMENT
(Subject to editorial corrections)

Mr Justice Lawrence Collins:
I	Introduction
1.	VTech carries on business as an importer of electronic products.  The products in issue are intended for children, modelled like a computer, and contain a number of in-built activities.  
2.	This is an appeal from the decision of the VAT and Duties Tribunal of March 12, 2002 (“the Decision”), classifying certain of VTech’s products as “toys” under heading 9503 of the Combined Nomenclature (“CN”), rather than as “games” under heading 9504. 
3.	Classification as toys under CN 9503 currently attracts a 4.7% rate of duty, whilst classification as “games” under CN 9504 attracted a rate of duty of 1.1%, which was reduced to 0.6% on January 1, 2003 and will be reduced to zero on January 1, 2004.  Success for VTech would mean that it and its associated companies would be able to claw back some 1.8 million euros of duty already paid and would be saved approximately 2.6 million euros over the next three years, making a total of 4.4 million euros (approximately £2.8 million).
4.	The parties agree that the products fall to be classified under chapter 95 of the CN.   Chapter 95 forms part of Section XX “Miscellaneous Manufactured Articles.” Chapter 95 is entitled “Toys, Games and Sports Requisites: Parts and Accessories thereof.”
5.	CN 9503 is entitled “Other toys; reduced-size (‘scale’) models and similar recreational models, working or not; puzzles of all kinds”.   Included within the heading are electric trains, model assembly kits, stuffed toys and toy weapons.  CN 9504 is entitled “Articles for funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment.”   Included within the heading are electric car racing sets, having the character of competitive games, video games and playing cards.
II	Legal background 
6.	The Common Customs Tariff came into existence in 1968.  By Article 28 of the revised EC Treaty Common Customs Tariff duties are fixed by the Council acting on a qualified majority on a proposal from the Commission.
7.	The level of customs duties on goods imported from outside the EC is determined at Community level on the basis of the Combined Nomenclature (“CN”) established by Article 1 of Council Regulation 2658/1987.   The CN is established on the basis of the World Customs Organisation’s Harmonised System laid down in the International Convention on the Harmonised Commodity Description and Coding System 1983 to which the Community is a party.   
8.	Article 3(1)(a)(ii) of the International Convention provides that, subject to certain exceptions, each contracting party undertakes “to apply the General Rules for the interpretation of the Harmonised System and all the Section, Chapter and Subheading Notes and shall not modify the scope of the Section, Chapters, headings or subheadings of the Harmonised System”.  The International Convention is kept up to date by the Harmonized System Committee, which is composed of representatives of the contracting states.
9.	The CN, originally in Annex I to Regulation 2658/87, is re-issued annually: the version applicable to the present case is Annex I to Regulation 2204/99 (12.10.99 OJ L278).  The CN comprises: (a) the nomenclature of the harmonized system provided for by the International Convention; (b) Community subdivisions to that nomenclature (“CN subheadings”); and (c)	preliminary provisions, additional section or chapter notes and footnotes relating to CN subheadings. 
10.	The CN uses an eight-digit numerical system to identify a product, the first six digits of which are those of the harmonised system, and the two extra digits identify the CN sub-headings of which there are about 10,000.  Where there is no Community sub-heading these two digits are “00” and there are also ninth and tenth digits which identify the Community (TARIC) subheadings of which there are about 18,000.
11.	There are Explanatory Notes to the Nomenclature of the Customs Co-operation Council, otherwise known as Explanatory Notes to the Harmonised System (“HSENs”).  The Community has also adopted Explanatory Notes to the CN (pursuant to Article 9(1)(a) of Council Regulation 2658/87), known as CNENs. 
12.	Binding Tariff Information is issued by the customs authorities of the Member States pursuant to Article 12 of the Common Customs Code (Council Regulation 2913/92/EEC) on request from a trader.  They are called “BTIs”, and such information is binding on the authorities in respect of the tariff classification of goods.  The BTIs issued in this matter were the subject of the appeal to the Tribunal in the present case.
III	Interpretation
13.	There are many decisions of the European Court on the interpretation of the tariff headings.  The decisive criterion for the tariff classification of goods must be sought generally, regard being had to the requirements of legal certainty, in their objective characteristics and properties, as defined in the headings of the Common Customs Tariff: e.g. Case C-177/91 BioforceGmbH v. Oberfinananzdirektion Munchen  [1993] ECR I-45, where the function of the product (hawthorn drops) was decisive; Case C-309/98 Holz Geenen GmbH v. Oberfinananzdirektion Munchen [2000] ECR I-1975, where the intended use of the product (wood blocks for window frames) was said to be such an objective criterion if it was inherent in the product; Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495, where the intended use of the product (pyjamas) was decisive, and the presentation of the goods was regarded as relevant. 
14.	The headings and the Explanatory Notes do not have legally binding force and cannot prevail over the provisions of the Common Customs Tariff: Case C-35/93 Develop Dr. Eisbein GmbH & Co. v Hauptzollamt Stuttgart-West [1994] ECR I-2655, para 21; Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495, per Advocate General Jacobs, para 32; Case C-309/98 Holz Geenen Oberfinananzdirektion Munchen [2000] ECR I-1975, para 14.  But they are important means for ensuring the uniform application of the Common Customs Tariff and are therefore useful aids to interpretation: e.g. Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [2000] ECR I-1975, para 11; Case C-309/98 Holz Geenen Oberfinananzdirektion Munchen [2000] ECR I-1975, para 14.  They may show that a classification by Commission Regulation is invalid, if the error made by the Commission is manifest: e.g. Case C-463/98 Cabletron Systems Ltd v Revenue Commissioners [2001] ECR I-3495, para 22.
15. 	It is for the national court (even in a case which has been referred to the European Court for guidance on the applicable principles) to determine the objective characteristics of a given product, having regard to a number of factors including their physical appearance, composition and presentation: Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495, para 21.
16.	The General Rules for the Interpretation of the CN (“GIRs”) are contained in Section 1A of Part 1 of Annex 1 to Council Regulation 2658/87 and have the force of law.  They include the following potentially relevant provisions:
(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.
17.	The application of these principles of interpretation are sufficient to permit national courts to decide most classification cases without reference to the European Court: “Occasionally, of course, a more general question of interpretation may surface, and it would be appropriate for a national court to refer a question to this Court.  But where that is not the case, national courts should not refer, and if they do the Court should in my view simply restate the …. principles.” (Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495, per Advocate General Jacobs, para 38).
IV	Classification Regulations
18.	Article 9 of Council Regulation 2658/87 makes provision for the adoption of regulations concerning, inter alia, the classification of goods in the CN.  Such regulations are proposed by the European Commission but must be submitted to the Customs Code Committee, a committee composed of representatives of the Member States and chaired by representatives of the Commission (Council Regulation 2658/87, Article 7).  
19.	The Customs Code Committee is a body constituted specifically for the purposes of classification, and its composition varies depending on the nature of the product at issue.  Where the Committee approves the Commission’s proposals, they may be adopted by the Commission; where it does not, they must be communicated to the Council which may take a different decision (Article 10).
20.	The consequence is that the Council has conferred upon the Commission, acting in co-operation with the customs experts of the Member States, a broad discretion to define the subject matter of tariff headings falling to be considered for the classification of particular goods.  But the power of the Commission to adopt the measures does not authorise it to alter the subject matter of the tariff headings which have been defined on the basis of the harmonised system established by the International Convention whose scope the Community had undertaken not to modify: Case C-309/98 Holz Geneen v. Oberfinananzdirektion Munchen [2000] ECR I-1975, para 13.
21.	Regulations, including classification regulations, are binding in their entirety from the date of their entry into force: EC Treaty, Article 249 (formerly Article 189).  A regulation providing that goods of a specified description are to be classified under a particular CN code: (a) is determinative of the issue of how goods of that specified description should be classified; and (b) may be applicable by analogy to identical or similar products. 
22.	It is common ground between the parties that where a Regulation concerns products which are similar to those in issue, then the classification in the Regulation must be followed unless and until there is a declaration from the European Court that the Regulation is invalid.  In Case C-119/99 Hewlett Packard BV v. Directeur Generale des Douanes [2001] ECR I-3981, Advocate General Mischo said (in reasoning which was followed and approved by the Court) that classification regulations are adopted “when the classification in the CN of a particular product is such as to give rise to difficulty or to be a matter for dispute.”( para 18).  He went on: 
“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)	
23.	Regulations may be declared invalid, but only by the European Court (or, in a direct action commenced by a private party, by the Court of First Instance of the EC): Case 314/85 Firma Foto-Frost v. Hauptzollamt Lubeck-Ost [1987] ECR 4199, para 17.  Unless and until that happens, national courts are of course obliged to give effect to a regulation.
24.	A classification by Commission Regulation is invalid, if the error made by the Commission is “manifest,” for example if it is based on an interpretation which is inconsistent with the Community’s international obligations, or does not take account of the Explanatory Notes or the GIRs : see e.g. Case C-463/98 Cabletron Systems Ltd [2001] ECR I-3495, para 22 the Court annulled part of a regulation, holding that the Commission had committed a manifest error of classification in determining that network cards and cables used in conjunction with computers to transfer information through a network should be classified as telecommunications equipment under CN 8517 rather than under CN 8471 which applies to automatic data processing machines. 
25.	In his opinion in Case C-463/98 Cabletron Systems Ltd [2001] ECR I-3495 Advocate General Jacobs explained that intensive scrutiny by the Court is justified where a Commission Regulation is alleged to bring the Community into conflict with its international obligations under the Harmonised System.  This will be the case where, as in the present case, the dispute centres on whether a product should be classified under one chapter heading rather than another.  He said (para 84):
“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.”
III	Facts
26.	The HSENs to CN 9503 state that this heading covers toys intended essentially for the amusement of persons (children or adults); and that it includes “Educational toys (e.g. toy chemistry, printing, sewing and knitting sets)” and “reduced-size (‘scale’) models includes models of a kind mainly used for recreational purposes, for example, working or scale models of boats, aircraft, trains, vehicles etc “other than sets having the character of competitive games of heading 95.04 (e.g. sets comprising slot-racing motor cars with their track layout).  It also includes toy marbles, and toys sports equipment, such as billiard sets.  It also excludes card games which come under heading 95.04.  
 27.	Note 2 of the HSENs for CN 9504 state that the heading includes: “Video games (used with a television receiver or having a self-contained screen) and other games of skill or chance with an electronic display”.
28.	In September 1996, the VAT Tribunal upheld VTech’s appeal against the classification by the Commissioners of a product called “Learning Pad”.  The Commissioners had classified the product Pad under CN 9503.  The Tribunal held that it was properly classified under CN 9504.  The Learning Pad consisted of an electronic keyboard unit which was programmed with a number of activities for children, and was designed for use by children aged 5-8 years and was described in its Users’ Manual as a “talking, electronic, multi-media, learning system”.  It was capable of being played by two players. 
29.	The Tribunal found that the product had characteristics of both a game and a toy.  It held:
“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)
30.	The Tribunal went on to find that the HSENs supported a classification under CN 9504 rather than under CN 9503.  In particular, it found that none of the educational toys referred to in note (17) to CN 9503 had the characteristics of a game, whereas note (2) to CN 9504 referred to games of skill or chance with an electronic display.   The Tribunal also found that GIR rule 3(a) applied with the result that the Learning Pad was properly classified under CN 9504.  
31.	In March 1997, a differently constituted VAT Tribunal found that the Commissioners had wrongly classified another of VTech’s products, the Smart Start Scholar, under CN 9503 and that it should instead be classified under CN 9504. 
32.	The Tribunal described the Smart Start Scholar as follows:
“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…”
33.	The Tribunal found that the product was both a toy and a game:
“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.”
34.	Given that both CN 9503 and CN 9504 were applicable, the Tribunal applied GIR rule 3(c) and on that basis classified the product under heading 9504.  
35.	In June 1997 the Commissioners issued to VTech a BTI classifying the “Amazing Lap Top Computer” (product B) and “My Little Talking Computer” (product C) as games under CN 9504 as a consequence of the Tribunal decisions in Learning Pad and Smart Start Scholar, in respect of products which were in varying degrees analogous.
36.	According to the Commissioners no appeal was brought against the Tribunal decisions because they related to products that were no longer being imported and Learning Pad consisted of a simple keyboard unit rather than a computer-like object.  It was thought preferable, and more certain, to have a binding Decision in relation to a current product.  The Commissioners therefore sought a ruling from the European Commission in relation to the Smart Start Premier (successor to the Smart Start Scholar).  The issue of the classification of the “Smart Start Premier” came before the Tariff and Statistical Nomenclature Section (Miscellaneous) of the Customs Code Committee. 
37.	The opinion of the Commission and the Customs Code Committee was that the products were to be classified as toys, and was embodied in Commission Regulation 981/98.  The reasoning and conclusions of Regulation 981/98 were confirmed in Regulation 184/2000, in relation to product A (Pre-Computer Prestige),  which was issued following further discussion in the Commission and a presentation by VTech.
38.	Column 1 of the Annex to Regulation 184/2000 describes a product similar to product A.  But the description states that the “device does not have its own operating system” and it later became apparent that product is freely programmable in BASIC and therefore does have its own operating system.  
39.	Column 2 of the Annex classifies the described product as a toy under heading 9503.  The reasons for this are set out in column 3 of the Annex as follows:
“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.”
40.	By a letters in February and March 2000 the Commissioners notified VTech of their decision to withdraw, with immediate effect, the BTIs (which classified the products under CN 9504) for the Pre-Computer Prestige (product A),  the “Amazing Lap Top Computer” (product B) and “My Little Talking Computer” (product C).  
41.	In June and August 2000 VTech applied for BTIs in respect of the “Talking Whiz Kid Platinum” (product D), “My Computer Pal” (product E), and “Spooky Adventures” (product F)  to CN 9504.  The Commissioners notified VTech of BTIs in respect of these products to CN 9503.  All of the decisions were upheld on review, and were the subject of the appeal to the Tribunal.
IV	Tribunal decision
42.	The Tribunal described the products as follows:
“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”
43.	The Tribunal heard evidence from the European Operations director of VTech Europe BV, who gave the Tribunal a demonstration of the relevant products.
44.	The Tribunal found that the Commissioners had erred in classifying products A and G as toys under CN 9503.  It held that those products were properly classified under CN 8471, as their main characteristic was that of a computer.  In so finding, the Tribunal held that Regulation 184/2000 was not apt to classify product A under CN 9503 as the product it described did not, unlike product A, have its own operating system.
45.	In relation to its relevance to the other products, the Tribunal decided that it was not open to VTech to rely on the invalidity of Regulation 184/2000 before the Tribunal because (a) VTech could have challenged the Regulation in a direct action against the Commission under Article 230 of the EC Treaty, on the basis that although legislative in form it was of direct and individual concern; and (b) the time limit for challenge under Article 230 had expired; and (c) (by implication) the time limit could not be circumvented by raising invalidity of the Regulation in these proceedings.
46.	The Tribunal first considered product A (the Pre-Computer Prestige), which was the intended object of Regulation 184/2000, although there was no specific reference to it.  The Tribunal said that the absence of an operating system was crucial to its classification by the Commission as an educational toy.  It could not therefore be classified by reference to Regulation 184/2000.  It was therefore classified as a computer within Chapter 84 of the CN.
47.	The product described in the Regulation was within Chapter 95 of the CN.  The Tribunal indicated that it had looked at the objective characteristics of products B to F and said that, although they had some features which were characteristics of games and others which were characteristic of toys, the Tribunal did not consider that they were markedly different from the product described in Regulation 184/2000.  They all contained the elements of learning which were the basis of the reasons given for the classification.
48.	In relation to product B (The Amazing Laptop Computer) the Tribunal said that it had facilities for arithmetic and language skills, although it lacked the reading and written exercises common to the other products, and the Tribunal relied on the literature which accompanied it.  That stated:-
“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.”
49.	The Tribunal stated that product C (My Little Talking Computer) was described in the literature as being “Filled with fun learning for pre-school children … the friendly voiced, cheerful melodies, exciting animation and sound effects enhance learning value.”
50.	The users’ manual for product D (The Talking Whiz Kid Platinum) said that it was “A talking electronic learning aid” which “offers a wide range of exciting and educational activities for fun learning”.
51.	Product E (My Computer Pal) was not a laptop computer style, but it had the appearance of a computer and the other characteristics, namely a keyboard and an LCD display, and the Tribunal therefore considered that the fact that it was in a different, fixed style, was not sufficient to take it out of the classification.
52.	Product F (Spooky Adventures) lacked the reading facility, but did contain written exercises and arithmetic, and the Tribunal referred to the note in the front of the manual, which stated that VTech the number one in electronic learning, was committed to providing superior educational learning products.
53.	The Tribunal concluded that all the products had the characteristics of a game as well as those of a toy, but accepted the Commissioners’ argument that their fundamental and overriding characteristic was that of an educational toy, as indeed was the clear intention of VTech in the way they had promoted the articles.
54.	The Tribunal referred to Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] 1-6415, para 31, where the Court said it was for the national court to determine, in the light of the composition and presentation of the product, whether they had the objective characteristics of the classification in question, and the Tribunal concluded that it was entitled to take account of the presentation of the items as educational toys.
55.	Accordingly, although they had some of the characteristics of games, their salient characteristic was that of educational toys and they were properly classified within 9503.  The main characteristic of products B – F was that of an educational toy, and the Tribunal said that none of the products could equally well be classified under CN 9504 on the basis of their objective characteristics, such that rule 3 of the GIR could apply.  If the Tribunal was wrong in that, then it determined that CN 9504 did not provided a more specific description of any of the products concerned.  The essential characteristics of the products were that of educational toys.
V	VTech’s case 
56.	VTech seeks: (a) an order quashing the Decision in so far as it dismissed VTech’s appeals; and (b) a reference for a preliminary ruling to the European Court as to: (1) the validity of Regulation 184/2000; (2) the interpretation of Regulation 184/2000 and its applicability to products B to F; and (3) the interpretation of CN 9503 and CN 9504. 
57.	Its arguments, most of which overlap the issues of the validity of the Regulation and the approach of the Tribunal, were these.  Despite the fact that the Regulation was critical to the outcome, the Tribunal wrongly held that it was not open to VTech to challenge the validity of the Regulation.  
58.	The Tribunal failed properly to classify the products according to the chapter headings of the CN.  Despite the finding that the products had characteristics of “games”, it did not explain why it considered that CN 9504 was inapplicable.  
59.	The Tribunal should have applied the reasoning in the Tribunal Decisions relating to Learning Pad and Smart Start Scholar, and it should have classified the products to CN 9504.  First, it should have done simply on the basis of the proper construction of CN 9504.  Note 2 of the HSENs for CN 9504 states that the heading includes: “Video games (used with a television receiver or having a self-contained screen) and other games of skill or chance with an electronic display” and the products are analogous to such games.  
60.	Second, it is clear that items designed for a competitive activity are to be classified as games under CN 9504 rather than as toys under CN 9503.  Thus: (a) CN 9504 90 10 expressly emphasizes that games are competitive, and requires “electric car racing sets, having the character of competitive games” to be classified under CN 9504; (b) CN 9503 covers items for the “amusement of persons.”  None of the examples given in the HSENs to heading 9503 are designed for competitive activity.  Some items are in principle capable of being used for competitive activity as well as for personal amusement.  The HSENs indicate that they should be classified under CN 9504 if their purpose is to be used in a competitive activity.  Thus HSEN note (18) to heading 9503 includes “balls other than those of heading 9504 or 9506”.  This indicates that only toy balls are to be classified under CN 9503; whereas balls intended for competitive games should be classified under CN 9504 and balls intended for use in sports should be classified under CN 9506; (c) no matter how infantile or educational, “card games” must be classified under CN 9504.
61.	Third, the finding by the Tribunal that the products had characteristics of a game as well as those of a toy, meant that GIR rule 3 applied because the goods were “prima facie classifiable under two or more headings.” In those circumstances the applicable part of rule 3 was rule 3(c), namely that goods “shall be classified under the heading which occurs last in numerical order among those which equally merit consideration,” i.e. CN 9504. 
62.	Fourth, in determining that “the presentation” of the products was “clearly as educational toys”, the Tribunal relied illegitimately on the promotional literature produced by the manufacturer.  The manner in which goods are presented or promoted is irrelevant to their proper classification, since the case-law of the European Court establishes that goods must be classified according to “their objective characteristics and qualities.”
63.	There were accordingly strong grounds for considering that Regulation 184/2000 is invalid.  First, the product described in the Regulation has the characteristics of a “game”.  This is implicit in the Regulation itself, which states in the reasons given for the classification “even though most the programs are in 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”.  This was also the view taken on the facts by the Tribunal.  The Tribunal rejected the evidence of the Commissioners that the products only had characteristics of “toys” and that there could be no overlap between “toys” and “games”, describing that evidence at paragraph 51 of its decision, as “surprising”.
64.	The Commission’s reasoning was based upon HSEN Note (17) to CN 9503, which states that toys include “Educational Toys (eg, toy chemistry, printing, sewing and knitting sets)”.  However, it does not follow from the fact toys are capable of being educational in nature that all educational objects should be classified as toys under heading 9503.  Games can also be educational in nature: examples are chess, Scrabble and Trivial Pursuit.  Thus, the fact that VTech’s products are educational is a neutral factor as regards their classification.  The examples of educational toys given in HSEN Note (17) do not include any items intended for competitive activity and tend to be items which are capable of providing amusement for one person.  Toy chemistry, printing, sewing and knitting sets are of a very different nature to VTech’s products and are not used for any competitive play.  The products are specifically designed to provide competitive play between two players as well as between a single player and the machine and the answers given by the players are scored. 
65.	The Commission also failed properly to apply the GIR, i.e. CN 9504 as the later in numerical order on the basis of rule 3(c), alternatively rule 3(a) on the basis that the most specific description of the product is provided by the terms of CN 9504 (game) rather than the more general description under the terms of CN 9503 (other toys); or in the further alternative under rule 3(b) on the basis that the essential character of the product consists in the electronic components which enable the user of the machine to play games, which would lead to classification under CN 9504.
66.	The Tribunal found as a matter of fact that Regulation 184/2000 wrongly classified the product it purported to classify, namely, product A, the Pre-Computer Prestige.  The Tribunal held that the product should properly be classified under CN 8471 as an automatic data processing machine, and that constituted further evidence of the invalidity of the Regulation.
67.	Therefore, had the Tribunal considered whether there was reason to question the validity of the Regulation (as it should have done), it would have concluded that there were sufficient doubts as to its validity and referred the question to the European Court.  It follows that the High Court, as there can be no question of VTech’s contentions being “unfounded,” should refer the question of validity of the Regulation to the European Court.
68.	VTech accepts that the European Court will only declare a classification regulation invalid if the Commission has made a “manifest error”, but submits that the European Court applies a strict level of scrutiny when determining whether the Commission has made a manifest error in classifying a product to a particular CN heading.  In particular, in reliance on the opinion of Advocate General Jacobs in Case C-463/98 Cabletron Systems Ltd [2001] ECR I-3495 (para 84), VTech submits that intensive scrutiny by the European Court is justified where a Commission Regulation is alleged to bring the Community into conflict with its international obligations under the Harmonised System, which will be the case where, as in the present case, the dispute centres on whether a product should be classified under one chapter heading rather than another.  
69.	If, contrary to VTech’s primary submission, Regulation 184/2000 is valid, it submits that the Tribunal erred in law in basing its classification of products B to F on the Regulation.  It applied the wrong test when it found that they were not markedly different from the product described in Regulation 184/2000 and that therefore those products should be classified in the same way as the product described in the Regulation.  
70.	If valid, the Regulation is only authoritative as regards the classification of the precise product it describes.  Products which differ from that product fall to be classified according to their own objective characteristics.  Regulation 184/2000 describes the product to which it applies with extreme precision.  It is therefore apt only to apply to the precise product described.  It would have been open to the Commission to describe the product to which the Regulation applies in more generic terms had it intended it to serve as the basis for classifying a wider range of goods.
71.	There is therefore no basis for the test applied by the Tribunal, namely that products which are not “markedly different” from that described in the Regulation fall to be classified in the same way.  Moreover, the test is unworkable; the range of products which can be described as “not markedly different” is not objectively ascertainable.  
72.	This is demonstrated by the circumstances of the present case, in which VTech’s evidence (which was not rejected by the Tribunal) established that there were significant differences between the products in issue and the product described in the Regulation.  For example: (a)	none of the products in issue has the ability to create and execute programmes written in BASIC, which is a feature of the product described in the Annex to the Regulation; (b) the products all have their own operating system; (c) products B, C, E and F are not integrated with office programmes, e.g., word processing and a daily planner; (d) products B C, E and F have no facilities for printing; and (e) product D incorporates games which are not educational in nature. 
VI	Commissioners’ case
73.	The starting point for the Commissioners is that VTech cannot show that any of the Tribunal’s findings of primary fact or factual inferences were perverse, or even that they were wrong, and the Court should not disturb its assessments.
74.	Since Regulation 184/2000 concerned products “not markedly different” from products B-F (Decision, para 143), the case cannot be decided in favour of VTech without a prior declaration from the European Court that the Regulation is invalid.  But there is no realistic prospect that the European Court will find such a manifest error.   
75.	For the purposes of GIR rule 1, although the products had “characteristics of a game as well as those of a toy”, their “fundamental and overriding characteristic” was that of an educational toy: Decision, paras 149, 151.  This conclusion was reached on the basis of their “objective characteristics” (para 143), as well as their presentation “which is clearly as educational toys” (para 150).  The intended use of the products is as educational toys.  In reaching that conclusion, the Tribunal was entitled, and this Court is entitled, to have regard not only to their characteristics but to the manner in which they are presented in the catalogues produced by VTech and in the literature accompanying the products.
76.	The Commissioners rely upon the findings of the Tribunal, and on the evidence which enabled them to be made, including: (a) letters of review in relation to the products under appeal; (b) descriptions of the goods as set out in the relevant BTIs; and (c) various users’ and instruction books produced by VTech to the Tribunal in relation to the products. 
77.	The conclusions of the Tribunal were confirmed by the terms of the headings/sub-headings: the products fall naturally into the general subheading of “other toys,” and by contrast, on no ordinary construction of the words could the products be characterised as “articles for funfair, table or parlour games” (CN 9504); and by the HSENs, which classify as toys (1) “educational toys” and “instructional toys”;   and (2) objects which are used for games, but whose toy-like characteristics predominate, such as marbles and in particular “toy sports equipment.” Objects such as toy tennis sets and hockey sticks are, on account of their toy-like qualities, classified under CN 9503, notwithstanding that their sole purpose is the playing of 2-person or 2-team competitive games. 
78.	By contrast, the HSENs applicable to CN 9504 only serve to demonstrate that the products do not belong there.  They are not parlour games.  VTech’s reliance on note (2) is misplaced.  It provides for classification under CN 9504 of “video games (used with a television receiver or having a self-contained screen) and other games of skill or chance with an electronic display”.  The reference is to play stations, games consoles etc. which do not constitute imitations of adult equipment such as computers, and whose function is merely the playing of games.  The toy computers are neither video games, nor other games of skill or chance.  Like many other toys, such as balls and marbles, they can be used for playing games.  As educational toy computers programmed with various learning activities, they are however toys and not games.
79.	The Tribunal was entitled to determine the classification on the basis of GIR Rule 1.  The Tribunal did not decide that products B-F were “prima facie classifiable under two or more headings”, within the meaning of rule 3. 
80.	The Tribunal held that the products had “characteristics of a game as well as those of a toy”.   But having some characteristics in common with a group does not imply eligibility to form part of that group; and the Tribunal did not find that the products were capable of being classified as parlour or table games, or articles for such games.   Its findings were deliberately qualified, when it stated only that they had “some of the characteristics of games”, and that they had “game-like facilities”.  The absence of a finding that the products are classifiable (or even prima facie classifiable) under CN 9504 is not suggested by VTech to be perverse and is not something that can be remedied on this appeal.
81.	In any event, the Tribunal was right to find that the products are not classifiable, prima facie or otherwise, under CN 9504, in the light of (a) the essential characteristics of the products as described by the Tribunal (para 14) and by VTech: “they are intended for children, modelled like a computer, and contain a number of in-built activities”; (b) the fact that the products are presented as educational toy computers, and are expressly described as such in their names, and each is described as a “toy” in its manual; (c) the fact that the majority of the functions available on the products could not easily be described as games, let alone table or parlour games
82.	They are aimed at fostering basic literacy and numeracy,  together, perhaps, with general keyboard skills and familiarity with computers.  The fact that they aim to do so in an entertaining way (in order both to sell the product and to keep the child’s interest) does not make them games, or articles for games.  Some activities do not even have a scoring system.  Even if they did, this would not make them games.  School work is often scored. 	Some of the products do incorporate games, but these are however never in the majority, and often turn out to be educational also.  One of the products (C) has no 2-player format at all, and even those products with 2-player capability do not apply it to all activities.  2-player format does not always involve direct competition between the two players, and even where it does, the fact of competition does not make a learning activity into a game.  Competition forms part of many activities, including learning, and is not confined to games.
83.	GIR rule 3 is not invoked purely by virtue of the fact that products could technically be brought under two or more headings.  The purpose of GIR 3 is to arbitrate between headings whose application remains finely balanced.
84.	Alternatively, if GIR rule 3 does apply, its application confirms that the appropriate heading is CN 9503:
(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.
VII	Conclusions
85.	The Tribunal’s decision on the facts is only subject to review in very limited circumstances: Edwards v. Bairstow [1956] AC 14. 
86.	In Commissioners of Customs and Excise v General Instrument (UK) Ltd., March 24, 1999, Dyson J accepted, as had Advocate General Jacobs in Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495 (para 30), that tariff classification was in essence a matter of factual evaluation in view of the features and properties of the products to be classified, and continued (p 12):
“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.” 
87.	The obvious starting point is the Decision.  I have already set out in detail the findings of the Tribunal.  I do not accept the submission of VTech that the application of Regulation 184/2000 was the only properly reasoned basis for the Decision.  A reading of the Decision shows, in my judgment, that Regulation 184/2000 was not treated as decisive, and that the Tribunal came to its conclusion on alternative and independent grounds: first, that the products were not markedly different from the product described in Regulation 184/2000 and were educational toys as was that product; second, that although they had some of the characteristics of games, their main or salient characteristic was that of educational toys within CN 9503, and they could not equally be classified as games under CN 9504, with the consequence that GIR rule 3 did not apply; third, if GIR rule 3 did apply then CN 9504 did not provide a more specific description of the products, and that the essential characteristics of the products were that of educational toys. 
88.	The application of Regulation 184/2000 was not apparently regarded as decisive because the technical specifications of the products were not the same as the product described in the Regulation, which like the Pre-Computer Prestige, is described as having 40 built-in activities, and none of the products in issue has as many. 
89.	In particular, the Tribunal made a clear finding, which was re-stated several times, that the products were educational toys: “the fundamental and overriding characteristic is that of an educational toy” (para 149);  “although they have some of the characteristics of games, their salient characteristic is that of educational toys” (para 151); and  “although all the machines presented to us have game-like facilities, … their main characteristic is that of an educational toy” (para 153).
90.	Before coming to this conclusion, the Tribunal had had the products demonstrated to it by VTech, and had seen the way in which they were presented (including the users’ manuals which clearly referred to them as toys) and the way in which they were intended to be used, and had heard evidence from the European operations director of VTech Europe BV, and from the Commissioners on the events surrounding the making of Regulation 184/2000. 
91.	It is not suggested on this appeal that any of the Tribunal’s findings of primary fact or factual inferences were perverse, or even that they were wrong.  Only if the Tribunal’s conclusions can be shown to have depended upon the application of an incorrect legal test is the court entitled to intervene.
92.	As I have said, it is common ground that where a classification Regulation concerns products which are similar to those in issue, then the classification in the Regulation must be followed unless and until there is a declaration from the European Court that the Regulation is invalid: Case C-119/99 Hewlett Packard BV [1991] ECR I-3981.
93.	The Regulation was found to concern products “not markedly different” from the products which are the subject of this appeal.  In particular, they all contained the elements of learning which were the basis of the reasons given for the classification.  This is so notwithstanding that the product which was the intended object of the Regulation (the Pre-Computer Prestige) did not in fact fall within it, because (contrary to the description in the Regulation) it did have its own operating system.
94. 	I accept the submission for the Commissioners that VTech has to show both (a) that the approach of the Tribunal was wrong in law, irrespective of whether the Regulation is valid or not; and (b) that there is a realistic possibility that the European Court will declare the Regulation invalid.  It is common ground that a classification Regulation will be declared invalid only if the Commission has made a “manifest error.”  
95.	In the present case the Tribunal decided that VTech’s failure to bring a direct action to challenge the validity of the Regulation resulted in its not being able to challenge the Regulation in the Tribunal proceedings.  But the Commissioners do not seek to argue that VTech’s failure to bring a direct action is sufficient reason to prevent this court from making a reference to the European Court, if the court takes the view (contrary to the Commissioners’ submissions) that a reference would in other respects be a desirable and appropriate course.  The Commissioners are content for any necessary decision on the admissibility issue to be dealt with in the European Court, in the event of a reference being made and an objection to admissibility being raised.
96.	A reference should therefore only be made if there is a realistic prospect that the European Court will find such a manifest error.  A party challenging such a Regulation will face the hurdle (but not an insuperable one) that classification Regulations are issued after discussion in the Customs Code Committee, a body constituted specifically for the purposes of classification, whose composition varies depending on the nature of the product at issue and which has specialised skill and experience in that type of product.  Regulation 184/2000 was issued after VTech had been given an opportunity to demonstrate the Pre-Computer Prestige to the Committee. 
97.	VTech relies essentially on the same points in its challenge to the validity of Regulation 184/2000 (and therefore of the Tribunal’s application of it) and in its criticism of the Decision in so far as it was based on the Tribunal’s interpretation of CN 9503 and CN 9504.
98.	The reasoning of the Regulation is based, for present purposes, on GIR rules 1 and 6, and the wording of CN 9503, and its conclusion is that “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.”  The Tribunal’s own evaluation was that the products were educational toys under CN 9503 and that GIR rule 3 was not implicated because they were not also classifiable as games under CN 9504.
99.	I do not consider that the reasoning of the Regulation, nor that of the Tribunal, can be faulted on legal grounds.
100.	There is no basis for the argument that the GIR have been misapplied.  Rule 1, on which the Regulation is expressly based, provides that for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes, and rule 6 applies the same rules to subheadings. 
101.	The products can reasonably be characterised as “other toys” (CN 9503 90).  Although they do not fall into the specific subheadings of “constructional toys”, “toy musical instruments” etc., they fall naturally into the general subheading of “other toys”.   But on no ordinary construction of the words could the products be characterised as “articles for funfair, table or parlour games” (CN  9504).
102.	The HSENs support this construction.  They classify as toys “educational toys” and “instructional toys”; and also objects which are used for games, but whose toy-like characteristics predominate, such as marbles and “toy sports equipment” which includes objects such as toy tennis sets and hockey sticks, notwithstanding that their main (and perhaps, sole) purpose is the playing of 2-person or 2-team competitive games.  By contrast, the fact that video games are included within the HSENs to CN 9504 is of no assistance in classifying the products in issue. 
103.	The intended use of the products is as educational toys, and the Tribunal was entitled to have regard to the manner in which they are presented in the catalogues produced by VTech and in the literature accompanying the products: see especially Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495. 
104.	The fact that the Tribunal held that the products had “characteristics of a game as well as those of a toy” does not mean that they were games.  The evidence was that “they are intended for children, modelled like a computer, and contain a number of in-built activities”, they are presented as educational toy computers, and are expressly described as such in their names, and each is described as a “toy” in its manual.  The majority of the functions available on the products could not easily be described as games, let alone table or parlour games (“parlour games” being the meaning of the French, German and Italian as well as the English version of CN 9503). 
105.	Both the Regulation and the Tribunal (in its primary finding on this aspect) cannot be criticised for stopping at GIR rule 1 (and the corresponding rule 6) and not going on to apply rule 3.  I accept the submission for the Commissioners that goods are not considered to be “prima facie classifiable under two or more headings”, with the result that rule 3 must be invoked, purely by virtue of the fact that they could technically be brought under two or more headings, and that the purpose of rule 3 is to arbitrate between headings whose application remains finely-balanced.  
106.	There are several decisions in the European Court where products were capable of being classified under more than one heading, and which were decided without reference to rule 3.  Thus in Case C-177/91 Bioforce [1993] ECR I-45 the product (extract of hawthorn with added alcohol, taken as a heart tonic) was capable of being classified both as a medicament and as a spirituous beverage.  Both Advocate General Gulmann and the European Court (who came to opposite conclusions) arrived at a classification without reference to rule 3.  In Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495 the product was capable of being worn both as a “nightdress” and as a “dress”, but the classification was resolved without recourse to rule 3, after consideration of the HSENs and on the basis of the objective characteristics of the product as reflected particularly in its intended use.
107.	I also accept the Commissioners’ contention that these cases confirm that the purpose of examining the “objective characteristics” of a product, and of having regard in doing so to such constructional aids as the HSENs and the intended use of the product, is to find the category in which it should be placed, and not to assemble a list of theoretically possible but increasingly implausible categories between which the provisions of rule 3 must be used to decide.
108.	If rule 3 did apply, then the Tribunal’s alternative reasoning, although not entirely transparent, is not susceptible to challenge on usual principles.  It appears to have applied rule 3(b) on the alternative hypothesis that (1) the products were prima facie classifiable under CN 9503 and CN 9504; (2) neither heading provided the most specific description; and (3) the products were composite goods, consisting both of toy elements and game elements of which the toy element gave them their essential character.  Another reading of the alternative ground of the Decision is that it applied rule 3(a) on the basis that CN 9503 provided the most specific description, but neither party contends that it did, or should have done so.
109.	VTech argues that, if rule 3 is applicable, then it is rule 3(c) which is applicable, with the mechanical result that the heading which is last in numerical order governs classification, i.e. CN 9504.  If the Tribunal applied rule 3(b) as its alternative reason, I do not consider that it can be criticised for doing so. 
110.	VTech argues that rule 3(b) is irrelevant because, on a literal interpretation, it is applicable only to mixtures of different physical materials or components.  But I accept the submission for the Commissioners that rule 3(b) could apply in those circumstances.  For the purposes of rule 3(b), in order to determine, from among the materials of which a product is composed, which is the one which gives it its essential character, it is necessary to determine whether the product would retain its characteristic properties if one or other of its constituents were removed from it: Case C-288/99 VauDe Sport GmbH v. Oberfinanzdirektion Koblenz [2001] ECR I-3683 (child carrier: metal and fabric); and Case C-276/00 Turbon International [2002] ECR I-1389 (ink cartridge: ink and plastic).  In Case 205/80 ELBA v. Hauptzollamt Berlin-Packhof [1981] ECR 2097 the decisive factors in determining the essential character of the goods in question were their external appearance and function.  The essential character was determined by the intended purpose, and not by the materials used.  The European Court rejected the submission of the Commission that there should be a narrow, “physical” interpretation of Rule 3(b), under which the plastic element of the product would have predominated.  The Court held (at para 17):
“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.”
111.	Nor do I consider that any criticism of the Regulation or the Decision can be based on the reasoning of the Tribunal decisions of September 1996 and March 1997 concerning Learning Pad and Smart Start Scholar.  I accept the argument for the Commissioners that both Tribunals were too ready to find that products were prima facie classifiable as both toys and games, even to the extent of regarding as potentially both toys and games (a) a pack of Happy Family playing cards (Learning Pad, para 43); and (b) board games such as ludo or snakes and ladders (Learning Pad, para 43; Smart Start Scholar, para 7).
112.	VTech urges me to make a reference to the European Court on the validity of the Regulation, and the interpretation of the Regulation and the headings of CN 9503 and 9504.  In considering this request, I bear in mind the following matters. 
113.	First, the national court has no jurisdiction to declare the Regulation invalid itself: that is a matter for the European Court: Case 314/85 Firma Foto-Frost v. Hauptzollamt Lubeck-Ost [1987] ECR 4199.  A national court of first instance has a discretion to refer the question of invalidity of a Regulation to the European Court under EC Treaty, Art 234.
114.	In certain circumstances a reference may be inadmissible if the applicant has or had standing to make a direct challenge under Article 230, e.g on the basis that the Regulation was not truly legislative in nature, but was of direct and individual concern: cf. C-188/92 TWD [1994] ECR I-833.  Customs classification regulations have frequently been challenged before national courts and questions of validity thereafter referred to the European Court: e.g. Case C-463/98 Cabletron Systems Ltd  [2001] ECR I-3495; Case C-309/98 Holz Geenen [2000] ECR I-1975.  So also has the European Court given many rulings on the interpretation of the CN: for recent examples see Case C-288/99 VauDe Sport [2001] ECR I-3683; Case C-276/00 Turbon International [2002] ECR I-1389.
115.	An obligation to make a reference (save in cases where the issue is acte clair) applies, under Article 234 EC, third paragraph, only to “a court or tribunal of a Member State from whose decisions there is no judicial remedy under national law.” All other national courts and tribunals have a discretion to refer under Article 234(2).  For this purpose the Chancery Division on an appeal of this kind is not such a court, notwithstanding that permission is required from the Court of Appeal for permission to appeal: see Chiron v. Murox (No. 2) [1994] FSR 187.
116.	Mr Vaughan QC for VTech has suggested that a national court must refer the question of validity to the European Court unless it considers that the grounds put forward by the applicant in support of invalidity are “unfounded”, citing Case 314/85 Firma Foto-Frost v. Hauptzollamt Lubeck-Ost [1987] ECR 4199, para 14.  I am satisfied that this not so.  The context indicates that what the Court was referring to in the passage was the power of the national court to declare a community act as valid if the arguments for invalidity were unfounded, and not a duty of the national court to make a reference unless the arguments were unfounded.  What the passage indicates is that a national court is fully entitled to consider the validity of a regulation, come to the conclusion that the submissions of invalidity are unfounded and determine the case on that basis without a reference.
117.	The discretion to refer is broad and unfettered: Case 166/73 Rheinműhlen [1974] ECR 33.  Recent guidance from the Court of Appeal (referring to the Opinion of Advocate General Jacobs in Case C-338/95 Wiener SI GmbH v. Hauptzollamt Emmerich [1997] ECR I-6495, who suggested “a greater measure of self-restraint” on the part of national courts: paras 18-21) warns against too great a readiness to refer, particularly in cases in which “the real difficulty is not in ascertaining the relevant principles of Community law but in applying them to the facts; and that is a task for the national court”: R (Professional Contractors’ Group) v Commissioners of Inland Revenue [2002] EWCA Civ. 1945 [2002] STC 165 at para 91; cf. Trinity Mirror v Commissioners of Customs and Excise [2001] EWCA 65; [2001] 2 CMLR 759, paras 48-55. 
118.	Factors militating against the making of a reference where the validity of a regulation is at stake include: (a) the fact that the Commission has a wide discretion in defining the subject-matter of tariff headings falling to be considered for the classification of particular goods, with the result that European Court will declare a classification regulation invalid only if the Commission has made a “manifest error” in classifying the product to a particular CN heading; and (b) the fact that the regulation may be relied upon by analogy, rather than as directly determinative of the parties’ rights.
119.	In the light of my findings, it follows that there is no basis for a reference to the European Court.  I accept that I have a very broad discretion to refer, but I am satisfied that this is not a case which is suitable for a reference.  First, in view of the approach of the Tribunal, whose Decision is not based exclusively on the Regulation, the validity of the Regulation is not necessary to my decision.  Second, even if it were necessary, I do not consider that there is any realistic prospect that the Commission will be found to have made a manifest error in classification.  Third, I do not consider that there is any issue of interpretation, as distinct from application, of CN 9503 and CN 9504 which requires a reference, nor any issue of interpretation of the GIR.
120.	The appeal is therefore dismissed.