Customs Ruling HQ H265035 - Ruling request regarding the tariff classification of Microsoft® Band fitness and data management wrist band; Harmonized Tariff Schedule of the United States (HTSUS) General Rules of Interpretation (GRI) 1 and 3(b)

Star
Send

HQ H265035
Jan 19, 2016

Type : Classification • HTSUS : 8517.62.00

CLA-2 OT:RR:CTF:TCM H265035 ALS

Mr. Neil Helfand
Sandler, Travis & Rosenberg, P.A.
505 Sansome Street, Suite 1475
San Francisco, California 94111

RE: Ruling request regarding the tariff classification of Microsoft® Band fitness and data management wrist band; Harmonized Tariff Schedule of the United States (HTSUS) General Rules of Interpretation (GRI) 1 and 3(b)

Dear Mr. Helfand:

This letter is in reply to your request for a ruling on the proper tariff classification of the Microsoft® Band fitness and data management wrist band. Our decision is set forth below. FACTS:

The article at issue is an electronic wrist band which is marketed as the “Microsoft Band.” It has an active-matrix organic light-emitting diode (AMOLED) screen that displays time, telephone call information, news, weather, and sports alerts, heart rate information, pedometer measurements, calorie consumption, sleep analysis, email, text, and calendar information, global positioning system (GPS) functions, and barometer information. When “paired” with a smart phone, the wrist band displays the last eight notifications of email, text, or calendar entries, but not real-time notifications of such without a connected smart phone. The wrist band is connected to the wearer’s smart phone and, independent of the smart phone, to the earphones via Bluetooth.

The wrist band does not have telephone, fitness data, news data, real-time email or text, time keeping functions independent of the smart phone. The wrist band does collect GPS data and displays non-map related functions such as distance and pace when used without a smart phone. GPS mapping functions require a connection to a compatible smart phone that is connected to a cloud-based service.

For smartphones utilizing the Windows-based mobile operating system, called the Cortana, the various functions can be accessed by speaking into the wrist band, and further allows the wrist band to be used as a playback device. Aside from those specific features on mobile telephones equipped with Cortana, the wrist band may also be used with iPhone and Android mobile phones. More generally, information from third-party mobile applications such as Strava and MapMyFitness may also be displayed on the wrist band. The screen is designed to be on at all times, but it may be turned off or put into screen saver mode to preserve battery life. The wrist band detects the pulse rate of the wearer through built-in sensors that also detect the number of steps that the wearer is taking, the numbers of calories burned, and whether pre-set exercise goals are being met. The data is transmitted to the application(s) on the smart phone to be calculated for display on the wrist band.

ISSUE:

Is the Microsoft Band properly classified under HTSUS heading 8517 as “other apparatus for the transmission or reception of voice, images, or other data,” under HTSUS heading 8519 as a “sound reproducing apparatus,” under HTSUS heading 9029 as a heart rate monitor or pedometer, under HTSUS heading 9031 as a “measuring or checking instrument... not specified or included elsewhere in [Chapter 90, HTSUS],” or under HTSUS heading 9012 as a watch?

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. * * * * * 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:

8519 Sound recording or reproducing apparatus:

9029 Revolution counters, production counters, taximeters, odometers, pedometers and the like; speedometers and tachometers, other than those of heading 9014 or 9015;

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:

* * * * * 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.

(IX) For the purposes of this Rule, composite goods made up of different components shall be taken to mean not only those in which the components 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. * * * * * Upon initial consideration of the physical characteristics and functions of the Microsoft Band, CBP finds that the commercial identity of the Microsoft Band prima facie differs from measuring and checking instruments described in several of the above-noted HTSUS headings. Specifically, the Microsoft Band features several electronic components—including an AMOLED display, Bluetooth transceiver, motion sensor (accelerometer), GPS functions, barometer measurements, heart rate monitor, speaker functions, time keeping functions, and accelerometer and gyro sensors that are uncommon in whole or part to articles of headings 8519, 9029, and 9031, HTSUS. Moreover, although the Microsoft Band is capable, while connected via Bluetooth to a mobile telephone, of performing some basic sound reproducing functions of 8519, capable of heart rate measurement and pedometer functions of 9029, capable of the accelerometer and gyro sensor functions of 9031, and capable of the time keeping functions of 9012, the Microsoft Band is primarily designed to display, manipulate, and store data via the use of various applications utilized by a Bluetooth-connected mobile telephone. Accordingly, CBP finds that the Microsoft Band substantially differs from the articles described by headings 8519, 9029, 9031, and 9012, and therefore cannot be classified under any of those headings by application of GRI 1.

In determining the correct classification of the Microsoft Band, CBP observes that the device is constructed of several component articles that are, prima facie, classifiable under two or more headings. Specifically, upon review of the Microsoft Band’s various component articles, there is no dispute that heading 8517, HTSUS, describes the radio transceiver; 8519, HTSUS, describes the sound reproducing capabilities; heading 9029, HTSUS, describes the heart rate monitor and pedometer functions; heading 9031, HTSUS, describes the accelerometer and gyro sensors; and heading 9012, HTSUS, describes the time keeping functions. Consequently, because the Microsoft Band 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 gives 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 Microsoft Band 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 (CIT 2005). Explanatory Note 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 (CIT 2012); Structural Industries v. United States, supra; Conair Corp. v. United States, 29 C.I.T. 888 (2005); Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278 (CIT 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 Microsoft Band is primarily used to display, manipulate, and store data in conjunction with a Bluetooth-connected mobile telephone utilizing an application geared toward fitness, along with the mobile telephone’s basic functions. The fitness application and Bluetooth connectivity allow the wearer to communicate with the paired mobile telephone to perform tasks including: making and receiving calls over the paired device; using voice commands to control the paired device (e.g., to send messages, take photos, set an alarm, check for calendar appointment, or check the weather forecast); displaying notifications from the paired device, including information such as missed calls, received text messages, and emails; playing music stored on the host device via Bluetooth® wireless headphones or speakers; performing functions of timekeeping instruments, such as a watch, stopwatch, alarm, and timer; and measuring and displaying health and exercise data (e.g., step counts, heart rates, and calorie consumption), by using its accelerometer and gyro-sensor.

By contrast, when the Microsoft Band is “unpaired”, i.e., without wireless connection to a “paired” mobile device, the Microsoft Band operates with substantial functional limitations that render it unable to perform many of the tasks for which the Microsoft Band is marketed. Consequently, although each of the Microsoft Band’s component articles (e.g., the microphone, speaker, AMOLED display, heart rate monitor, accelerometer, and gyro sensor) enable important functionality in the operation of the Microsoft Band, it is the Bluetooth transceiver that is indispensable to the core, essential condition of the Microsoft Band, because the radio transceiver facilitates the display, manipulation, and storage of data between the Microsoft Band and paired external devices.

The Bluetooth radio transceiver enables the Microsoft Band to communicate wirelessly with a paired, Internet-connected mobile device to display, manipulate, and store data via the use of various fitness-oriented applications, a function that distinguishes the Microsoft Band from other devices that incorporate similar component electronics. Upon consideration of the role of each of the Microsoft Band’s component articles in relation to the use of the merchandise, CBP therefore finds that the essential character of the Microsoft Band is imparted by the Bluetooth radio transceiver. Radio transceivers are classified in heading 8517, HTSUS, which provides, in pertinent part, for “Other apparatus for the transmission or reception of voice, images, or other data […] including apparatus for communication in a wired or wireless network […]”. Accordingly, the Microsoft Band is classified in heading 8517, HTSUS, specifically in subheading 8517.62.

HOLDING:

By application of GRI 3(b), the Microsoft Band is classified in heading 8517, HTSUS. Specifically, it is 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 2015 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