CLA-2 OT:RR:CTF:TCM H265038 LWF
Barbara Y. Wierbicki
Tompkins & Davidson LLP
5 Hanover Square, 15th Floor
New York, NY 10004
RE: Tariff classification of the Movado “M1 Bold” wearable electronic device and inductive (wireless) charger
Dear Ms. Wierbicki:
This is in reply to your letter of April 14, 2015, to U.S. Customs and Border Protection (CBP), on behalf of Movado Group, Inc. (“Movado”), seeking a prospective ruling on the tariff classification of the Movado “M1 Bold” smart watch wearable electronic device under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The Movado M1 Bold smart watch is a battery-operated, wearable electronic device in the form of a wrist-watch. The M1 Bold features a rechargeable battery, touch-sensitive, liquid-crystal display (LCD), a central processing unit (CPU), random access memory (512MB RAM), a 1 GB internal flash hard drive, microphone, accelerometer, and wireless communication capabilities (Bluetooth®).
The M1 Bold is designed to wirelessly connect and communicate (“pair”) with an Internet-connected Android or iOS mobile device. Via a “companion” app installed on the paired mobile device, the M1 Bold utilizes an open wireless technology standard (Bluetooth®) to transmit data to and from the wearable device to alert the wearer to upcoming appointments, incoming emails, texts, social media updates, and phones calls. As with similar wearable electronic devices, a wearer can interact with the M1 Bold by tapping and swiping the touch-sensitive LCD.
The M1 Bold will be imported packaged for retail sale and is sold with an inductive (wireless) charger.
ISSUE:
Whether the Movado M1 Bold smart watch is classified, by application of General Rule of Interpretation (GRI) 1, in heading 9102, HTSUS, as a wrist watch, pocket watch, including stop watches, other than those of heading 9101, HTSUS, or by application of GRI 3(b), as a composite good made up of different components, classified as if it consisted of the material or component which gives the M1 Bold its essential character.
LAW AND ANALYSIS:
Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that 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 GRIs may then be applied in their appropriate order.
GRI 3 provides, in pertinent part, as follows:
When, by application of rule 2(b) or for any other reason, good are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
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, insofar as this criterion is applicable.
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The HTSUS headings under consideration are the following:
8517 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof:
8518 Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures; headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers; audio-frequency electric amplifiers; electric sound amplifier sets; parts thereof:
8521 Video recording or reproducing apparatus, whether or not incorporating a video tuner:
9031 Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof:
9102 Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101:
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Note 1(n) to Section XVI, HTSUS, provides, in relevant part:
This section does not cover:
…
(n) Clocks, watches or other articles of chapter 91;
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The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HS and are thus useful in ascertaining the proper classification of merchandise. It is CBP’s practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The ENs to GRI 3(b) provide, in pertinent part, that:
(VII) In all these cases the goods are to be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
(VIII) The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.
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As an initial matter, CBP notes that the Movado M1 Bold smart watch and its inductive charger are classified as a “set” pursuant to GRI 3(b), because the smart watch and charger are imported packaged together for retail sale. The M1 Bold and charger are classifiable in different headings, are “put up together” to enable a user to charge, wear, and operate the M1 Bold smart watch, and are offered for sale directly to purchasers without repacking. See EN (X) to GRI 3(b). There can be no dispute that the M1 Bold smart watch imparts the essential character of this set, because it is the dominant component article, by use and cost in relation to the charger. It is also the reason why a consumer would purchase the set. Consequently, in accord with GRI 3(b), the set shall be classified as if consisting only of the M1 Bold smart watch.
Upon consideration of the physical characteristics and functions of the M1 Bold smart watch, CBP finds that the commercial identity of the device, prima facie, differs from that of wrist watches and other watches described by heading 9102, HTSUS. See Headquarters Ruling Letter (“HQ”) H260060, dated July 14, 2015 (classifying the “Apple Watch” smart watch under heading 8517, HTSUS). Specifically, the M1 Bold features several electronic components—including a touch-sensitive LCD, CPU, 512MB RAM, 1GB internal flash memory hard drive, microphone, accelerometer, and Bluetooth® wireless communication capabilities—that are uncommon to articles of heading 9102, HTSUS.
Moreover, although the M1 Bold is capable of displaying basic timekeeping information while both “paired” and “unpaired” with an Android or iOS mobile device, the M1 Bold is primarily designed to wirelessly connect and communicate with an Internet-enabled mobile device. Via a “companion” app installed on the paired mobile device, the M1 Bold utilizes an open wireless technology standard (Bluetooth®) to transmit data to and from the wearable device to alert the wearer to upcoming appointments, incoming emails, texts, social media updates, and phones calls. The fact that the M1 Bold is worn like conventional wrist watches of Chapter 91, HS, merely indicates a different physical configuration of a device that is, prima facie, designed to extend the functionality of a “paired” mobile device for the convenience of the wearer. Accordingly, CBP finds that the Movado M1 Bold substantially differs from the articles described by heading 9102, HTSUS, and therefore, is not classifiable under heading 9102 by application of GRI 1.
CBP observes that the M1 Bold smart watch is constructed of several components that are, prima facie, classifiable under two or more headings. For example, the M1 Bold’s Bluetooth® wireless communication capabilities are described by heading 8517, HTUS; the touch-sensitive LCD is described by heading 8521, HTSUS; the microphone is described by heading 8518, HTSUS; and the accelerometer is described by heading 9031, HTSUS. Consequently, because the Movado M1 Bold is, prima facie, classifiable under two or more headings, classification shall be effected by application of GRI 3—specifically GRI 3(b), which directs that composite goods made up of different components shall be classified as if they consisted of the material or component that imparts upon them their essential character.
GRI 3(b) covers mixtures, composite goods, and goods put up in sets for retail sale. For purposes of this rule, Explanatory Note IX to GRI 3(b) provides that, “composite goods made up of different components shall be taken to mean not only those in which the component are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts.” (Emphasis original). As such, the Movado M1 Bold is properly described as a composite good because it consists of electrical components of independent, individual function that are attached to each other to form an inseparable whole.
Under GRI 3(b), composite goods must be classified according to the material or component that imparts the article with its essential character. The “essential character” of an article is “that which is indispensable to the structure, core or condition of the article, i.e., what it is.” Structural Industries v. United States, 360 F. Supp. 2d 1330, 1336 (Ct. Int’l Trade 2005). EN VIII to GRI 3(b) explains that “[t]he factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of the constituent material in relation to the use of the goods.” Recent court decisions on the essential character for GRI 3(b) purposes have looked primarily to the role of the constituent material in relation to the use of the goods. See Estee Lauder, Inc. v. United States, 815 F. Supp. 2d 1287, 1296 (Ct. Int’l Trade 2012); Structural Industries, 360 F. Supp. 2d 1330; Conair Corp. v. United States, 29 C.I.T. 888 (2005); Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278 (Ct. Int’l Trade 2006), aff’d 491 F.3d 1334 (Fed. Cir. 2007).
In accord with the meaning of “essential character” under GRI 3(b), CBP finds that the Movado M1 Bold smart watch is primarily used to wirelessly connect and communicate with a paired, Internet-connected Android or iOS mobile device to transmit data. Via a “companion” app installed on the paired mobile device, the M1 Bold utilizes an open wireless technology standard (Bluetooth®) to transmit data to and from the wearable device to alert the wearer to upcoming appointments, incoming emails, texts, social media updates, and phones calls. By contrast, when the M1 Bold is “unpaired”, i.e. without wireless connection to a paired mobile device, the M1 Bold operated with substantial functional limitations that render it unable to perform the data alert functions and tasks for which the M1 Bold is marketed. In this respect, CBP finds that the M1 Bold smart swatch is substantially similar to other smart watches (for example, the “Apple Watch” and the “Samsung Gear Live Android Smartwatch”) that CBP has classified under heading 8517, HTSUS. See HQ H260060, dated July 14, 2015; and HQ H257947, dated July 14, 2015.
The M1 Bold’s Bluetooth® functionality enables the device to communicate wirelessly with a paired, Internet-connected Android or iOS mobile device to display, manipulate, and store data via a “companion” app on the paired mobile device. Accordingly, upon consideration of the form and function of each of the M1 Bold’s component articles, CBP finds that the essential character of the device is imparted by its wireless communication capabilities, which are described under heading 8517, HTSUS, as “Other apparatus for the transmission or reception of voice, images, or other data[…] including apparatus for communication in a wired or wireless network[…]”. Consequently, by application of GRI 3(b), the Movado M1 Bold is classified in heading 8517, HTSUS, specifically in subheading 8517.62.
Similarly, CBP notes that the Harmonized System Committee (HSC) of the World Customs Organization (WCO) recently considered the tariff classification of four “smart watch” devices and classified each of the devices under subheading 8517.62, HS. See Annex H/7 to Doc. NC2116E1b (HSC/55). As stated in T.D. 89-90, CBP accords HSC opinions the same weight as that of Explanatory Notes, i.e., while neither legally dispositive or binding, classification decisions of the HSC are generally indicative of the proper interpretation of HS headings. Accordingly, CBP observes that the conclusions reached in this ruling are consistent with the HSC’s classification of certain smart watch devices, as reflected in the WCO Compendium of Classification Opinions (C.O.) at C.O. 8517.62/21, 8517.62/22, 8517.62/23, and 8517.62/24.
HOLDING:
By application of GRI 3(b), the Movado M1 Bold smart watch and inductive (wireless) charger are classified in heading 8517, HTSUS. Specifically, they are classified in subheading 8517.62.00, HTSUS, which provides for , “Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof: Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.” The 2016 column one, general rate of duty for merchandise of subheading 8517.62.00, HTSUS, is free.
Duty rates are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at http://www.usitc.gov/.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch