CLA-2 RR:CTF:TCM 968150 BtB
Area Director
JFK Airport Area
c/o Liquidation and Protest Branch
Building 77
JFK International Airport
Jamaica, NY 11430
Re: Classification of certain watches (watch heads) from Switzerland with sterling silver cases and stainless steel bezels; Protest No. 4701-05-100549
Dear Area Director:
This is a decision on the Application for Further Review (“AFR”) of Protest Number 4701-05-100549, timely filed with the Bureau of Customs and Border Protection (“CBP”) by Vincent Bowen, Esq. on behalf of Yurman Design, Inc. (“Yurman Design” or “protestant”), concerning the classification under the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”) of articles described by the protestant as the “David Yurman T4 Madison watch series.” With its Protest, Yurman Design submitted a “Protest Statement” detailing the reasons for protest.
FACTS:
The articles at issue are actually watch heads for ladies wrist watches. “Watch head” is the industry term given to a watch sold without a strap, band, or bracelet. For simplicity and because the absence of a strap, band or bracelet is not relevant to their classification, the articles will be referred to as “watches.” In its Protest Statement, Yurman Design describes these watch heads:
… [T]he case is made of solid sterling silver. This includes the case body, case back, cable motifs on sides and godroons (double bands at 12hr and 6hr for bracelet insertion). Only the bezel (or front) is made of a non-precious metal, specifically steel.”1
The footnote signaled in the above quotation reads:
1The case construction and compositions are identical on all models of T4 Madison silver and steel watches. In addition, all of the models subject to [Protest Number 4701-05-100549] have quartz movements with three jewels …. There are certain differences in the models—specifically, the color of the dials, kind of numbers on dials and presence, quantity and placement of diamonds—that do not affect classification.
The backs of the watches are die sunk with the words “Silver 925-Stainless Steel.” The watches are made in Switzerland and are electrically operated (battery powered). However, they were not imported with batteries.
Protest Number 4701-05-100549 covers a shipment of the watches at issue that was entered through John F. Kennedy International Airport in September 2004. The watches in that shipment were entered under subheading 9102.11.65, HTSUSA, which provides for: “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Wrist watches, electrically operated, whether or not incorporating a stop watch facility: With mechanical display only: Other: With strap, band or bracelet of textile material or of base metal, whether or not gold- or silver-plated: Other.” The entry covering the merchandise liquidated on July 29, 2005, with the watches at issue classified under subheading 9102.11.65, HTSUSA (a “no change” liquidation).
Protest Number 4701-05-100549 was timely filed with CBP on August 1, 2005. Further review of Protest Number 4701-05-100549 was properly accorded to protestant pursuant to 19 C.F.R. § 174.24 because the decision against which the protest was filed involves matters previously ruled upon by the Commissioner of Customs or his designee or by the Customs courts but facts are alleged or legal arguments presented which were not considered at the time of the original ruling.
In its Protest and Protest Statement, Yurman Design asserts that the watches at issue are classified in heading 9101, HTSUSA, which provides for: “Wrist watches, pocket watches and other watches, including stop watches, with case of precious metal or of metal clad with precious metal” and not in heading 9202, HTSUSA, which provides for: “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101.”
ISSUE:
Whether the watches at issue are classified in heading 9101, HTSUSA, having cases of precious metal or of metal clad with precious metal, or heading 9102, HTSUSA, as other watches.
LAW AND ANALYSIS:
Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides, in part, that classification decisions are to be "determined according to the terms of the headings and any relative section or chapter notes." If the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied, in order.
The Harmonized Commodity Description and Coding System Explanatory Notes (“EN”) constitute the official interpretation of the Harmonized System at the international level (for the 4 digit headings and the 6 digit subheadings) and facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and GRI. While neither legally binding nor dispositive of classification issues, the EN provide commentary on the scope of each heading of the HTSUSA and are generally indicative of the proper interpretation of the headings. See T.D. 89-80, 54 Fed. Reg. 35127-28 (Aug. 23, 1989).
A product's classification is determined by first looking to the headings and section or chapter notes. See Orlando Food Corp. v. United States, 140 F.3d 1437 (Fed. Cir. 1998). “Only after determining that a product is classifiable under the heading should the court look to the subheadings to find the correct classification for the merchandise." Id. Several chapter notes are relevant to the classification of the watches at issue. First and most importantly, Note 2 to Chapter 91, HTSUSA, states:
Heading 9101 covers only watches with case wholly of precious metal or of metal clad with precious metal, or of the same materials combined with natural or cultured pearls, or precious or semiprecious stones (natural, synthetic or reconstructed) of headings 7101 to 7104. Watches with case of base metal inlaid with precious metal fall in heading 9102.
Additionally, “watches” is defined in Additional U.S. Note 1(a), to Chapter 91, HTSUSA, as embracing timepieces (including timepieces having special features, such as chronographs, calendar watches and watches designed for use in skin diving) of a kind for wearing or carrying on the person. Also, “cases” is defined in Additional U.S. Note 1(b) to Chapter 91, HTSUSA, which states that the term embraces inner and outer cases, containers and housings for movements, together with parts or pieces, such as, but not limited to, rings, feet, posts, bases and outer frames, and any auxiliary or incidental features, which (with appropriate movements) serve to complete the watches, clocks, time switches and other apparatus provided for [in Chapter 91, HTSUSA].
Before this analysis can proceed further, it is necessary to set forth the HTSUSA definitions for additional terms relevant to this analysis. “Precious metal” means silver, gold and platinum. See Note 4(a) to Chapter 71, HTSUSA. “Metal clad with precious metal” means material made with a base of metal upon one or more surfaces of which there is affixed by soldering, brazing, welding, hot-rolling or similar mechanical means a covering of precious metal. Except where the context otherwise requires, the expression also covers base metal inlaid with precious metal. See Note 7 to Chapter 71, HTSUSA. “Wholly of” means that the goods are, except for negligible or insignificant quantities of some other material or materials, composed completely of the named material." See General Note 3(h)(v)(A), HTSUSA.
It is undisputed that the watches at issue meet the definition for “watches” set forth in Additional U.S. Note 1(a), to Chapter 91, HTSUSA. The sole and determinative issue in this matter is whether the cases of the watches at issue are “of precious metal or of metal clad with precious metal.” If they are, the watches at issue are classified in heading 9101, HTSUSA. If they are not, the watches at issue are classified in heading 9102, HTSUSA.
The EN to heading 91.01, in pertinent part, states:
In accordance with Note 7 to Chapter 7, the expression “metal clad with precious metal” means material made with a base of metal upon one or more surfaces of which there is affixed, by soldering, brazing, welding, hot-rolling or similar mechanical means, a covering of precious metal.
* * * * *
However, watches with case of precious metal or of metal clad with precious metal, having a steel back, fall in heading 91.02, as do watches with case of base metal inlaid with precious metal.
The watches at issue are not wholly of precious metal. The bezels of the watches are composed of stainless steel, which is a “base metal” not a “precious metal.” See Note 3 to Section XV, HTSUSA, which defines “base metal.” The watches at issue are also not “of metal clad with precious metal.” The bezels of the watches at issue are not covered with precious metal, as the definition requires. Rather, non-precious (base) metal composes a prominent part of their cases, the bezels. This base metal is not removable, not covered in any way, and is highly-visible on the watches. As the watches at issue are not “with case wholly of precious metal” or of “metal clad with precious metal” these articles, pursuant to Note 2 to Chapter 91, HTSUSA, are not classified in heading 9101, HTSUSA, but in heading 9102, HTSUSA.
Yurman Design makes two main arguments on why the watches at issue are classified in heading 9101, HTSUSA. First, Yurman Design asserts that bezels are not embraced in the definition of “cases” and, therefore, the base metal bezels on the watches at issue do not impact an evaluation on the cases of those watches. Protestant states that “[i]n various rulings Customs itself has recognized that a case body (with or without separate caseback) constitutes a case unto itself independent of any bezel” and cites several rulings. Protestant cites New York Ruling (“NY”) I89112, dated January 19, 2003, NY H81811, dated June 20, 2001, NY H80785 dated June 14, 2001, NY G85783, dated February 12, 2001, NY G81266, dated September 28, 2000, and NY F85962, dated April 27, 2000.
We disagree with protestant’s assertion. The bezels on the watches at issue are parts that “serve to complete” the watches at issue. Accordingly, the bezels are embraced in the definition of “cases” set forth in Additional U.S. Note 1(b) to Chapter 91, HTSUSA. Because their bezels are of base metal, the cases of the watches at issue are not “wholly of precious metal.” In regard to the protestant’s statement set forth above , CBP has not recognized that a case body (with or without a separate caseback) is a case, independent of its bezel. CBP did not make such a determination in any of the rulings cited by protestant. While parts of the case may be described, by name, in detail, it is incorrect to infer that such a description removes the part from the term “case” as defined in Additional U.S. Note 1(b) to Chapter 91, HTSUSA.
Second, Yurman Design argues that all watch cases, even those classified in 9101, HTSUSA, as being wholly of precious metal or of metal clad with precious metal contain “… functional parts composed of non-precious metal materials, such as back screws, a back gaskets [sic], screw bars, spring bars (housing springs), fixing clamps, clamp fixing screws, flanges, a bezel gasket, bezel screws and a crystal gasket.” Yurman Design continues, asserting, “[i]f 9101 treatment were conditioned on all metal components being of precious metal, than few if any watch cases would ever qualify for 9101 treatment.” We recognize that certain watches with case wholly of precious metal or of metal clad with precious metal classified in heading 9101, HTSUSA, may have minor parts composed of other materials in their case. However, those parts may not make up a significant quantity of the case. See General Note 3(h)(v)(A), HTSUSA. In the case at hand, the stainless steel bezels are significant parts of the cases of the watches at issue. As a result, those watches are not “with case wholly of precious metal.”
The watches at issue are specifically provided for by subheading 9102.11.95, which provides for: “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Wrist watches, electrically operated, whether or not incorporating a stop watch facility: With mechanical display only: Other: Other: Other.” Classification of the watches at issue in subheading 9102.11.65, HTSUSA, which provides for: “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Wrist watches, electrically operated, whether or not incorporating a stop watch facility: With mechanical display only: Other: With strap, band or bracelet of textile material or of base metal, whether or not gold- or silver-plated: Other” was not correct because the watches were not entered with a strap, band, or bracelet.
HOLDING:
The certain watches (watch heads) at issue, identified as the “David Yurman T4 Madison watch series,” are classified in subheading 9102.11.95, which provides for: “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Wrist watches, electrically operated, whether or not incorporating a stop watch facility: With mechanical display only: Other: Other: Other.” The watches must be reported in accordance with the scheme set forth in Statistical Note 1 to Chapter 91, HTSUSA.
The applicable rate of duty under the 2004 HTSUSA for merchandise classified in subheading 9102.11.95, HTSUSA, is “76¢ each + 8.5% on the case + 2.8% on the strap, band or bracelet + 5.3% on the battery.” The calculation of duties on watches classified in subheading 9102.11.95, HTSUSA, requires that these articles be constructively separated into their component parts and each component separately valued. See Statistical Note 1 to Chapter 91, HTSUSA. As the watches at issue did not include straps, bands or bracelets, the portions of the compound rate of duty applying to those component parts would not be applicable, although those components must be reported pursuant to Statistical Note 1 to Chapter 91, HTSUSA. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUSA and the accompanying duty rates are provided on the world wide web at www.usitc.gov.
Since the rate of duty under the classification indicated above is the same as the liquidated rate, you are instructed to deny the protest in full. In accordance with Section IV of the Customs Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entries in accordance with the decision must be accomplished prior to mailing of the decision.
No later than 60 days from the date of this letter, the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and by other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division