CLA-2 OT:RR:CTF:TCM H279898 PTM
TARIFF NO: 8517.62.00
Port Director
U.S. Customs & Border Protection
6747 Engle Road
Middleburg Hts, OH 44130
RE: Protest No. 4101-2016-100262 ; Tariff Classification of various Fitbit wearable fitness trackers
Dear Port Director,
We are writing in response to your correspondence dated September 8, 2016, in which you forwarded us the above-referenced protest and application for further review (“AFR”) submitted by Fitbit, Inc. (“Fitbit”). The protest concerns the tariff classification of several different models of wearable fitness trackers on the Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our decision, we have incorporated the substance of our meeting with Fitbit on October 27, 2016, and Fitbit’s supplemental submission dated December 2, 2016. Samples of the Fitbit Charge, Fitbit Charge HR and Fitbit Surge were provided. Our response follows.
FACTS:
On April 15, 2015, Fitbit made entry on a shipment of various models of fitness trackers with CBP. Specifically, the shipment included models of the Fitbit Surge and the Fitbit Charge HR models. On February 26, 2016, CBP liquidated the entry. On April 22, 2016, CBP issued a Notice of Action notifying Fitbit that it was reclassifying the merchandise. On May 13, 2016, CBP re-liquidated the entry under subheading 9031.80.80 HTSUS, which provides for “Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof: Other instruments, appliances and machines: Other.” On June 28, 2016, Fitbit filed the instant protest.
Fitbit produces wirelessly-communicative, wearable electronic devices primarily designed to track various fitness and health related metrics. The Fitbit Charge, Charge HR and Surge are products in its line of devices. The devices are paired wirelessly to a smart phone or other internet-enabled device via a Bluetooth radio transceiver. In turn, the paired device communicates with Fitbit’s servers to interpret and display the data received. The paired device must have the Fitbit application (“app”) downloaded to the smart device. Each of the Fitbit devices must be “set up” by pairing it with the smart device and entering the user’s profile on the app. During set up, the user enters information necessary for the proper functioning of the device. For example, the user’s height will determine stride length, which in turn will permit the Fitbit to determine how far the user has traveled. Other information entered includes which arm the user wears the device (dominant or non-dominant hand), weight (which is used to determine calories burned), which exercises the user plans to undertake and track, whether measurements will be taken using metric or imperial system, whether to display the time in 12 or 24 hour basis, and clock display pattern.
The Fitbit devices track the data while affixed to the user’s wrist. The Fitbit Charge measures steps taken, distance traveled, calories burned, active minutes, hourly activity stationary time and time slept. When paired with a smart phone, the device will display the number of incoming calls. Through the Fitbit app, the Fitbit Charge can be programmed with an alarm that will cause it to buzz at the appropriate time. The Fitbit Charge HR adds heart-rate monitor functionality. The Fitbit Surge adds a Global Positon System (“GPS”) tracker, which permits the user track exercise routes, speed, and elevation climbed.
Most of the captured data can be viewed directly of the Fitbit device itself, or on the paired smart device after syncing wirelessly. Some of the data, such as sleep, is not displayed on the device and may be viewed only on the app. The app lets the user see your progress on-the go, and shows you detailed charts and graphs so you can track your trends over time. In order for the data to be interpreted and properly displayed, the raw data collected by the Fitbit device must be transmitted to Fitbit’s servers for processing, and then retransmitted back to the smart device and Fitbit products for display. While some of the data is viewable on the Fitbit device, all of the data that is collected and processed by Fitbit’s servers is viewable from a single interface such as the user’s dashboard on the Fitbit app or via the web at fitbit.com. See Fig A. For example, a user can tap a button on the Fitbit device to indicate when they have begun a workout. The device will monitor the length of time of the workout, calories burned, steps taken and elevation climbed. On the Fitbit App on the synced smart device, the user can see more detailed information concerning the workout. This data includes a graph readout of the workout indicating the highest and lowest periods of exertion as measured by heartrate. With the Fitbit Surge, the user can view a map route of their run or walk. See Fig B. Thus, while the user can get basic feedback concerning their workout on the device itself, a full evaluation requires the user to sync the device and view it on the App.
Fitbit offers social features that require the use of the App. For example, a user can find “friends” that also use Fitbit devices by cross-referencing the user’s contacts in their smart device or other social media platforms, such as Facebook. The users can then compete against one another or join in various challenges, such as who completes the most steps over a week. Other secondary features also require the Fitbit to sync with the smart device. Software updates are pushed to the paired smart device to the Fitbit. The Fitbit must be synced in order to maintain the proper time and date. For the Fitbit Surge, the device must be synced in order to play music from the smart device.
Fig A:
Fig B:
ISSUE:
What is the tariff classification of the Fitbit Charge, Fitbit Charge HR and Fitbit Surge?
LAW AND ANALYSIS:
Initially, we note that this matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed on June 28, 2016, within 180 days of the date of liquidation as required by 19 U.S.C. §1514(c)(3)(A). We note that CBP voluntarily reliquidated the initial liquidation of the entry within 90 days consistent with 19 U.S.C. §1501.
Further Review of Protest No. 4101-2016-100262 is properly accorded to the Protestant pursuant to 19 C.F.R. § 174.24(a) because the protested decision is alleged to be inconsistent with the ruling of the Commissioner of CBP or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise. Specifically, Fitbit contends that that the classification of the instant merchandise is inconsistent with CBP’s decisions in Headquarters Rulings (“HQ”) H260060 (July 14, 2015), HQ H265035 (Jan. 19, 2016), and HQ H265038 (Feb. 23, 2016).
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).
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 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:
The Fitbit devices 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 Fitbit Surge. Heading 9029 HTSUS describes the pedometer function. Heading 9031 describes the accelerometer. Because the Fitbit devices 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 Fitbit 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 Fitbit devices are primarily used to wirelessly connect and communicate with a paired smart device to measure and track health and fitness metrics. Using the Fitbit App installed on the paired smart device, the Fitbit Devices use an open wireless technology standard (Bluetooth), to transmit data to and from the wearable device. The Fitbit devices require a Bluetooth connection to be set up with the user’s preferences out of the box. The Fitbit device itself uses internal components such as an accelerometer and pedometer to measure various metrics such as steps taken, calories burned, flights of stairs climbed, time spent sleeping, and (in the case of the Fitbit Surge) the route of a run or bike ride. However, much of this information cannot actually be analyzed without first being transmitted to the paired smart device and subsequently through Fitbit’s servers, which processes and repackages the data so that it can be viewed on the paired device. The data can then be displayed, manipulated and stored on the Fitbit App. Additional functionality requires the device to be actively paired with the smart device. For example, the phone number of incoming calls can only be displayed while the Fitbit is paired, and the Fitbit Surge must be paired in order to play music stored on the smart device. Consequently, it is the wireless Bluetooth transceiver that enables the user to fully access all of the Fitbit’s functionality.
We note that in New York Ruling (“NY”) N068636 (Aug. 12. 2009), CBP classified a first-generation “Fitbit Tracker” in heading 9031 HTSUS. The Fitbit Tracker consisted of a pedometer and accelerometer. CBP classified the product in heading 9031 HTSUS rather than as a pedometer because “it is clear that the device does a more than merely count a user’s steps.” However, the Fitbit Tracker was not as sophisticated as the instant Fitbit Charge, Charge HR and Surge. The Tracker could communicate wirelessly with a base station connected to a computer, but could not pair with a smart device via a Bluetooth transceiver like the instant devices. Furthermore, the Tracker was developed prior to the development of the Fitbit App, which permits the user to access the full range of functions on their paired smart device. Because the Fitbit products at issue here are more sophisticated and function differently than the Fitbit Tracker, the analysis in N068636 does not govern the classification of the Fitbit products at issue here.
By contrast, CBP has recently found similar wearable “smart” devices to be properly classified in heading 8517, HTSUS. In Headquarters Ruling (“HQ”) H260060 (July 14, 2015), CBP classified the “Apple Watch” under heading 8517 HTSUS. CBP found that the Apple Watch was primarily used to execute apps that display, manipulate and store data via wireless communications with a paired, Internet-connected Apple iPhone mobile device. Thus, even though the Apple Watch features several electronic components—including an AMOLED display, CPU with installed OS, 512MB RAM, 4GB internal flash memory hard drive, radio transceiver, accelerometer, gyro sensor, heart rate monitor, speaker, and microphone—CBP applied GRI 3(b) and determined that the Bluetooth transceiver imparted the “essential character” because it facilitates the display, manipulation, and storage of data between the Apple Watch and a paired iPhone. Similarly, the Fitbit devices at issue here require the Bluetooth transceiver to communicate with the paired smart device, which in turn permits the user to utilize the full functionality of the device. In HQ H257947, CBP classified the “Gear Live” wearable smart device in heading 8517 HTSUS by application of GRI 3(b). See also, HQ H273382, dated January 3, 2017 (classifying the Garmin VivoActive and VivoActive HR wearable fitness devices in heading 8517 HTSUS by application of GRI 3(b)), HQ H265035, dated Jan. 19, 2016, (classifying the “Microsoft Band” wearable fitness tracker in heading 8517 HTSUS).
Upon evaluation of the form and function of each of the Fitbit Charge, Fitbit Charge HR and Fitbit Surge components, CBP finds that the essential character of the devices 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 Fitbit devices 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 Fitbit Charge, Fitbit Charge HR and Fitbit Surge devices 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 2017 column one, general rate of duty for merchandise of subheading 8517.62.00, HTSUS, is free. You are instructed to GRANT the protest in full.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), 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 entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division