CLA-2
OT:RR:CTF:TCM H270725 PTM
TARIFF NO: 9113.90.80
David Sanders
Cassidy Levy Kent (USA) LLP
2000 Pennsylvania Ave. NW, Suite 3000
Washington, D.C. 20006
RE: Internal Advice Request, Tariff Classification of Apple Watch Bands
Dear Mr. Sanders,
We are writing in response to your request to U.S. Customs and Border Protection (“CBP”) dated October 15, 2015 in which you request internal advice on behalf of Apple, Inc. (“Apple”), concerning the tariff classification of wrist bands for the Apple Watch under the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our determination, we also considered the substance of our meeting on September 22, 2016 and your additional submission dated September 29, 2016. Our response follows.
FACTS:
The product at issue are bands for the Apple Watch. The Apple Watch is a “smart watch” that pairs with a user’s iPhone via a Bluetooth® connection to perform various functions. In Headquarters Ruling (“HQ”) H260060 we described the Apple Watch as follows:
The Apple Watch is a battery-operated, wearable electronic device in the form of a wrist-watch, incorporating a touch-sensitive, active-matrix organic light-emitting diode (AMOLED) display, a central processing unit (CPU), random access memory (512MB RAM), a 8GB internal flash memory hard drive, microphone, speaker, vibration motor, accelerometer, gyroscope, heart rate sensor, and a radio transceiver (NFC, Bluetooth® 4.0, and Wi-Fi).
* * *
When the Apple Watch is “paired” with an iPhone, the wearer is able to use apps on the Apple Watch to display, manipulate, and store data on the Apple Watch itself, or on the connected iPhone. The Apple Watch apps communicate wirelessly with the WatchKit extension on the iPhone and are capable of performing a variety of functions, including: receiving and responding to electronic communications, tracking fitness, displaying location-based information and directions, accessing Internet data, sending and receiving audio messages, paying for purchases using Apple Pay™ via NFC wireless connections, displaying airplane boarding passes, and controlling an Apple TV®. See “Apple Unveils Apple Watch—Apple’s Most Personal Device Ever,” www.apple.com/pr/library/2014/09/09Apple-Unveils-Apple-Watch-Apples-Most-Personal-Device-Ever.html (last visited June 17, 2015).
Although the Apple Watch must be paired with an iPhone to perform most functions, the Apple Watch is capable of performing several functions without being connected to an iPhone. “Unpaired” functions of the Apple Watch include: playing music stored locally on the Apple Watch; using watch, alarm, timers, and time functions; keeping track of physical activities and exercise; displaying photos stored locally on the Apple Watch; and using Apple Pay™ to make purchases via NFC wireless connections. See “Use Apple Watch without its paired iPhone,”
The Apple Watch bands secure the Apple Watch to the user’s wrist. The bands attach to the Apple Watch with specially designed lugs, and are secured on the user’s wrist via a buckle mechanism. There are various buckle designs. The bands have two size variables: lengths and lug size. You state that the lug and groove contained on the strap do not fit other wearable devices. The bands are available in three materials: Fluroelastomer, Stainless Steel, and Bovine Leather and are available in various colors. The Apple Watch is similar in size to conventional wrist-watches. Further, it is worn by the user in the same manner as a conventional wrist-watch. The Apple Watch Bands perform the same function as the watch band or strap of a conventional wrist watch: it attaches the watch to the user’s wrist.
The Apple Watch has various functions that require that the watch be affixed to the user’s wrist. The watch has activity tracking functionality that measures the user’s activity levels. It can measure how many calories a user burns and the user’s heartrate. The “taptic” functionality provides the user with notifications by “tapping” the user’s wrist. The watch will not go into standby mode so long as it is affixed to the user’s wrist. Otherwise, the user must input a security code in order to unlock it. Functions such as “Apple Pay” will not work while the watch is in standby mode. The watch has a power-saving function that powers the watch off when it is not oriented towards the user’s view. Other functions do not require the Apple Watch to be on the user’s wrist. These include displaying the time and date, playing music, connecting to the internet and displaying photos.
You state that the lugs are specially designed for the Apple Watch and that it is not possible to secure a strap or band to the Apple Watch without the specially designed and patented lugs. However, the lugs are available to third parties to permit them to create their own Apple Watch straps and bands. The following are images of Apple Watch Bands:
ISSUE:
What is the tariff classification of the Apple Watch bands?
LAW AND ANALYSIS:
Classification under the 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, GRIs 2 through 6 may then be applied in order.
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, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the System. See T.D. 89-80, 54 Fed. Reg. 35127 (Aug. 23, 1989).
The HTSUS provisions under consideration are as follows:
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:
8517.70 Parts
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9113 Watch straps, watch bands and watch bracelets, and parts thereof:
Note 1(n) to Section XVI, HTSUS, which includes heading 8517 states:
1. This section does not cover:
(n) Clocks, watches or other articles of chapter 91;
Thus, if the Apple Watch Bands are classifiable in Chapter 91, then they are excluded from classification in heading 8517 by virtue of Note 1(n) to Section XVI.
Note 1(g) to Chapter 91, HTSUS, provides:
1. This chapter does not cover:
(g) Articles of chapter 85, not yet assembled together or with other components into watch or clock movements or into articles suitable for use solely or principally as parts of such movements (chapter 85).
With respect to Note 1(g) to Chapter 91, Chapter 85, HTSUS, the Apple Watch Bands at issue here are simple bands designed to hold the Apple Watch on the user’s wrist and therefore cannot be characterized as electrical machinery and equipment or parts thereof that are assembled together into a watch or clock movements, or into articles suitable for use solely or principally as parts of such movements. Thus, the Apple Watch Bands are not excluded from classification in Chapter 91 HTSUS by virtue of Note 1(g).
In HQ H260060, CBP classified the Apple Watch 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.” In reaching this classification, CBP applied GRI 3(b) because the Apple Watch was found to be a composite good consisting of several components that were prima facie classifiable in different headings. CBP found that the essential character of the Apple Watch is imparted by the radio transceiver because it enables the Apple Watch to be paired with the Apple iPhone and run various applications. Consequently, it is your position that the Bands are appropriately classified as parts of the Apple Watch in heading 8517 HTSUS, rather than in heading 9113 HTSUS, which provides eo nomine for watch bands and straps.
In support of your position, you state that the Bands are specifically designed for use with the Apple Watch, and that the Apple Watch cannot properly function without the Bands. In order for the Apple Watch to measure activity levels, it must be affixed to the wrist of the user to measure heart rate. The taptic functionality of the Apple Watch also requires that the Watch be affixed to the wrist. The Apple Watch will not go into standby mode when it is attached to the user’s wrist.
However, the Apple Watch does function as a watch and comes “in the form of a wrist-watch.” See HQ H260060, supra. Furthermore, the Apple Watch will still perform numerous functions while not affixed to the user’s wrist. The Watch can still display the time, play music, surf the internet, respond to text messages and emails, perform as a clock-alarm on Night Stand Mode and run various other applications. The Bands themselves do not perform any of these functions. Rather, they serve solely to keep the Apple Watch affixed to the user’s wrist in the same manner that watch bands affix traditional watches to users’ wrists. Furthermore, as stated in HQ H260060, CBP determined that the radio transceiver imparted the essential character of the device. The Apple Watch Bands do not assist the transceiver in the Apple Watch in any way from pairing with the user’s iPhone. Therefore, they cannot be said to be an indispensable part of the transceiver and an essential part of the Apple Watch.
By contrast, CBP has previously classified smart-watch bands in heading 9113. In New York Ruling (“NY”) N263082, dated April 17, 2015, CBP classified watch bands designed for use with smart-watches in heading 9113. Notably, the ruling classified several bands intended for use with the Apple Watch in various subheadings of heading 9113 depending on the component material. You state that this ruling is not applicable to the instant watch bands because CBP had not at that time issued its ruling concerning the tariff classification of the Apple Watch itself in HQ H260060. We disagree. The sole function of the Apple Watch Band is to fasten the Apple Watch to the wrist of the user, and in this respect is no different from any other watch band. Consequently, we find that the Apple Watch bands are classifiable in heading 9113, HTSUS.
You cite several rulings that classify straps in headings other than 9113. In NY E88650 (Oct. 26, 1999), legacy Customs Service classified a strap used to hold a bar code reader in heading subheading 8473.30 HTSUS, which provides for parts and accessories of a machine in heading 8471 HTSUS. However, the bar code reader has no resemblance either in form or function to any sort of watch. In HQ H244547 (Mar. 28, 2014), CBP classified a wrist mount for a mobile computer in subheading 8473.30. The wrist mount contained a plastic mounting bracket was attached to the user’s arm using two hook and loop straps. Here again, the product at issue has no resemblance in form or function to any sort of watch. Due to the dissimilarity between these products and the merchandise at issue here, we find that these rulings are inapplicable.
The EN to heading 91.13 adds further support for classifying the Bands in heading 9113. It states:
91.13 Watch straps, watch bands and watch bracelets, and parts thereof.
This heading covers all kinds of watch straps, watch bands and watch bracelets, i.e., all devices for fastening watches to the wrist.
Watch straps, watch bands and watch bracelets may be of any material, for example, base metal, precious metal, leather, plastics or textile material. They may also be clearly decorative in character without this affecting their classification.
The heading also includes parts of watch straps, watch bands and watch bracelets, identifiable as such, of any material.
(Emphasis added).
Thus, the EN to heading 91.13 clarifies that the heading covers watch straps, watch bands and watch bracelets and all devices for fastening watches to the wrist. Furthermore, they may be of any material and may provide decorative character. The heading also includes parts of watch straps, bands and bracelets. The Apple Watch Bands are described by the EN to heading 91.13 because they are bands that fasten the Apple Watch to the user’s wrist, are composed of various materials and can provide decorative character.
Based on the foregoing, we find that the Apple Watch Bands are classifiable in heading 9113 HTSUS. Consequently, they are excluded from classification in heading 8517 by virtue of Note 1(n) to Section XVI, HTSUS.
HOLDING:
By application of GRI 1, the Apple Watch Bands are classified in heading 9113 HTSUS. Specifically, the Watch Bands of fluroelastomer and bovine leather are classified in subheading 9113.90.80, which provides for “Watch straps, watch bands and watch bracelets, and parts thereof: Other: Other.” The column one, general rate of duty is 1.8% ad valorem. The Watch Bands of stainless steel are classified in subheading 9113.20, which provides for “Watch straps, watch bands and watch bracelets, and parts thereof: Of base metal, whether or not gold- or silver-plated.” The column one, general rate of duty is 11.2% ad valorem. 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 www.usitc.gov.
You are to mail this decision to the importer of record no later than 60 days from the date of the decision. At that time, the Office of Trade, 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 other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division