CLA-2 OT:RR:CTF:TCM H273382 PTM
TARIFF NO: 8517.62.00
Neil Helfand
Sandler, Travis & Rosenberg, P.A.
505 Sandsome St., Suite 1475
San Francisco, CA 94111
RE: Tariff Classification of Garmin VivoActive HR and VivoSmart HR
Dear Mr. Helfand,
We are writing in response to your correspondence dated January 13, 2016, in which you request a binding ruling from U.S. Customs & Border Protection (“CBP”) on behalf of your client Garmin Ltd. (“Garmin”). Your ruling request concerns the tariff classification of the Garmin VivoActive HR and VivoSmart HR on the Harmonized Tariff Schedule (“HTSUS”). In our evaluation, we also considered you supplemental submission dated March 9, 2016.
FACTS:
You request a classification of two separate products: the Garmin VivoActive HR (herein “VivoActive”) and the VivoSmart HR/HR+ (herein “VivoSmart”). We discuss each in turn.
The VivoActive is described as a Global Position System (“GPS”) smartwatch with wrist-based heart rate. The VivoActive is worn on a user’s wrist and designed to manage data and support personal fitness. Garmin states that the VivoActive is a multifunctional electronic wearable device which pairs with a smartphone or tablet (herein a “smart device”), and that features enhanced capability. The VivoActive pairs with a smart device via a radio Bluetooth transceiver. While paired with the smart device, the VivoActive can notify the user of incoming calls, preview emails, issue calendar alerts, receive texts and social media updates, and play stored music from the host device. The user is able to track health and fitness-related activities recorded by the device and can view the data on an application (“app”) on the smart device. The data that can be tracked by the VivoActive are the user’s heart rate, number of steps, calories burned, floors climbed, activity intensity and sleep quality. You state that Garmin employs a cloud-based system called “Garmin Connect.” Garmin Connect is an online training tool to store, analyze and share users’ fitness activities. The VivoActive also contains a barometric altimeter, a 3-axis accelerometer, a light sensor and magnetometer. It also functions as a watch, and can display the time and date when other options are not in use.
The user can download apps to the VivoActive by purchasing them through the “Connect IQ” store, which is Garmin’s app marketplace. The user can download an app created either by Garmin or a third party by using the Garmin Connect app. By selecting the application of their choice, the paired smart device then transfers the data for the application directly to the device via the Bluetooth connection. Several of the apps require an active Bluetooth connection to the smart device to which the VivoActive is paired in order to perform. Through Garmin Connect, the devices can input data to other fitness apps, such as the popular “MyFitnessPal.”
The VivoSmart is available in two versions, the VivoSmart HR and VivoSmart HR+. The VivoSmart is an electronic device that is worn on a person’s wrist and designed to manage data and support personal fitness. The VivoSmart HR+ features GPS capability, the VivoSmart HR does not. The VivoSmart is a multifunctional device that pairs with a smartphone or tablet. The major functions of the device, while paired with a smart device, include notification of calls, email previews, calendar alerts, receiving texts, updates on social media, streaming music stored from the host device. The VivoSmart is designed and marketed to make use of the Garmin Connect system using the Garmin Connect app on a smart device, and through it the user can track health and fitness-related activities recorded by the VivoSmart. The VivoSmart also displays the biometric and activity data it captures. That data includes: heart rate, steps taken, calories burned, floors climbed, activity intensity and sleep quality. The VivoSmart also functions as a watch, and displays the time, day and date.
ISSUE:
What is the tariff classification of the VivoActive and VivoSmart devices?
LAW AND ANALYSIS:
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs). GRI 1 requires that classification be determined first according to the terms of the heading of tariff schedule and any relative section or chapter notes, and unless otherwise required, according to the remaining GRIs taken in their appropriate order.
GRI 3 provides 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:
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 substances 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.
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.
When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are generally indicative of the proper interpretation of these headings. See T.D. -80, 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.
The HTSUS provisions under consideration in this case 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:
* * *
8526 Radar apparatus, radio navigational aid apparatus and radio remote control 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 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.
Upon examination and consideration of the characteristics and functions of both the VivoActive and VivoSmart, CBP finds that the commercial identity of these products are prima facie different from wrist watches and other watches described by heading 9102, HTSUS. Specifically, the VivoActive and VivoSmart feature components such as a Bluetooth transceiver, visual display, accelerometer and heart rate monitor that are uncommon to articles of heading 9102 HTSUS. Although the VivoActive and VivoSmart are capable of displaying time and date, they are not primarily intended to be used as a watch. The VivoActive and VivoSmart are designed primarily as devices to monitor and track biometric data and fitness activity, and are marketed as such. Consequently, we find that the VivoActive and VivoSmart differ substantially from the articles described by heading 9102, and cannot be classified under that heading by application of GRI 1.
The VivoActive and VivoSmart are comprised of several component articles that are prima facie classifiable under two or more headings. Heading 8517 HTSUS describes the radio Bluetooth transceiver. Heading 8526 HTSUS describes the GPS in the VivoActive and VivoSmart HR+ products (the base VivoSmart model does not contain a GPS). Heading 9029 HTSUS describes the heart rate monitor. Heading 9031 describes the accelerometer. Because the VivoActive and VivoSmart are prima facie classifiable under more than one heading, GRI 3 is implicated. Specifically GRI 3(b) 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 VivoActive and VivoSmart devices are properly described as composite goods because they consist 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).
Based on the meaning of “essential character” under GRI 3(b), we find that the VivoActive and VivoSmart devices are primarily used to wirelessly connect and communicate with a paired smart device. Using the Garmin Connect App installed on the paired smart device, the VivoActive and Vivosmart uses an open wireless technology standard (Bluetooth), to transmit data to and from the wearable device. While paired via the Bluetooth connection, the VivoActive and VivoSmart can notify the user of incoming calls, preview emails, issue calendar alerts, receive texts and social media updates, and play stored music from the host device. The user is able to track health and fitness-related activities recorded by the device and can view the data on the paired smart device on the associated app. The data that can be tracked by the VivoActive and VivoSmart are heart rate, number of steps, calories burned, floors climbed, activity intensity and sleep quality. The VivoActive and VivoSmart can track and display biometric and exercise data while unpaired, however, it is only through the app and smart device that a user can track this data over time or use GPS associated functionality, such as mapping a run. The data transmitted from the devices cannot be used by other fitness apps such as MyFitness Pal without the data being transmitted to the paired smart device via a Bluetooth connection. Consequently, we find that the VivoActive and VivoSmart are substantially similar to other wearable smart devices that CBP has classified under heading 8517 HTSUS. For example, in HQ H260060 (July 14, 2015), CBP classified the Apple Smart watch under heading 8517 HTSUS. Similarly, in HQ H257947 (July 14, 2015), CBP classified the “Samsung Gear Live Android Smartwatch” in heading 8517 HTSUS. See also, HQ H265038 (Feb. 23, 2016).
Upon evaluation of the form and function of each of the VivoActive and VivoFit components, 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 VivoActive and VivoSmart are 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 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 VivoActive and VivoSmart 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/.
Sincerely,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch