CLA-2 OT:RR:CTF:TCM H268657 LWF
Joyce M. Duquette
Manager, Customs Compliance
Fossil Partners LP
10615 Sanden Drive
Dallas, TX 75238
RE: Tariff classification of a quartz chronograph wristwatch equipped with an accelerometer and Bluetooth® wireless connectivity, imported and packaged with an inductive (wireless) charger
Dear Ms. Duquette:
This is in reply to your request, on behalf of Fossil Partners LP (“Fossil”), seeking a prospective ruling from U.S. Customs and Border Protection (CBP) on the tariff classification under the Harmonized Tariff Schedule of the United States (HTSUS) of the Fossil “Grant Connect Watch,” a quartz chronograph wristwatch equipped with an accelerometer and Bluetooth® wireless connectivity, imported and packaged with an inductive (wireless) charger.
FACTS:
The Fossil “Grant Connect Watch” is a rechargeable, battery-operated quartz chronograph wristwatch equipped with an accelerometer sensor and Bluetooth® wireless connectivity. The case and bracelet of the wristwatch are composed of stainless steel. The Grant Connect Watch face resembles that of a traditional, analog chronograph watch; however, the back of the device is distinguished by a flat, circular plastic module attached to the underside of the watch case that houses the accelerometer and Bluetooth® transceiver.
The Grant Connect Watch is designed to track a wearer’s activity levels by detecting physical movements of the wristwatch via the built-in accelerometer. When wirelessly connected (“paired”) with an Android or iOS-powered mobile device (“smartphone”), the accelerometer sensor on the back of the wristwatch is used to detect the movement and footsteps of the wearer. Movement data collected by the accelerometer is then wirelessly transmitted to the paired smartphone device via the Bluetooth® transceiver, where a “companion” app installed on the smartphone calculates and records the number of steps taken by the wearer.
The Grant Connect Watch does not feature an internal flash hard drive. Consequently, when the wristwatch is not connected to a smartphone (“unpaired”), it is not capable of recording or storing movement data. Accordingly, if used independently of a paired smartphone, the Grant Connect Watch functions in a manner identical to that of traditional analog wristwatches.
The Grant Connect Watch will be imported packaged for retail sale with an inductive (wireless) charger.
ISSUE:
Whether the Fossil Grant Connect Watch is classified in heading 9102, HTSUS, as a wrist watch, pocket watch, including stop watches, other than those of heading 9101, or in 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 (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528.
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:
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 Fossil Grant Connect Watch and its inductive (wireless) charger, which are imported packaged together for retail sale, are classified as a “set” pursuant to GRI 3(b). Consistent with the description of retail “sets” provided in the ENs to GRI 3(b), there is no dispute that the Grant Connect Watch and charger are classifiable in different headings, are “put up together” to enable a user to charger, wear, and operate the activity-tracking wristwatch, and are offered for sale directly to purchasers without repacking. See EN (X) to GRI 3(b).
Similarly, it is uncontested that the Grant Connect Watch imparts the set with its essential character, because the wristwatch is the dominant component article by use and cost in relation to the charger. The time-keeping and activity-tracking function of the wristwatch is also the reason why a consumer would purchase the set. Consequently, the Fossil Grant Connect Watch and inductive charger set shall be classified, in accord with GRI 3(b), as if consisting only of the Grant Connect Watch wristwatch.
With respect to the individual classification of the Grant Connect Watch device, CBP observes that the physical characteristics and wireless functions of the Grant Connect Watch substantially differ from those of other “smart watches” previously classified by CBP under heading 8517, HTSUS. See, e.g., Headquarters Ruling Letters (“HQ”) H260060 and H257947, dated July 14, 2015 (classifying the “Apple Watch” and “Samsung Gear Live Android Smartwatch” under heading 8517, HTSUS, respectively).
A comparison between the Grant Connect Watch and those smart watches previously classified by CBP under heading 8517, HTSUS, reveals that the Grant Connect Watch lacks several of the internal electronic components typically found in smart watches of heading 8517, HTSUS. Specifically, unlike the Apple Watch and Samsung Gear Live at issue in ruling letters HQ H260060 and H257947, the Grant Connect Watch does not feature a touch-sensitive Liquid-Crystal Display (LCD) or other interactive controls that would allow a wearer to view or manipulate data on the wristwatch itself. Similarly, because the Grant Connect Watch is not equipped with an internal flash memory hard drive, the device is not capable of independently collecting, storing, or processing data when “unpaired” from a smartphone—functions that both the Apple Watch and Samsung Gear Live are capable of performing when used in “paired” and “unpaired” configurations.
The wireless communication functions of the Grant Connect Watch are also limited. Unlike the Apple Watch or Samsung Gear Live, the Grant Connect Watch does not receive, display, or transmit emails, texts, social media updates, or phone calls. By contrast, the Grant Connect Watch’s wireless communication functions are limited to the collection and one-way transmission of activity data from the wristwatch to a “paired” Android or iOS-powered mobile device. Similarly, the Grant Connect Watch does not run a pre-installed mobile operating system that would enable the device to execute processing programs known as “apps.”
Upon consideration of the distinguishing physical and functional characteristics between the Grant Connect Watch and other “smart watches” previously classified by CBP in heading 8517, HTSUS, CBP finds that the Grant Connect Watch substantially differs from the Apple Watch and Samsung Gear Live. Accordingly, the analysis contained in ruling letters HQ H260060 and H257947 is not dispositive of the classification of the Grant Connect Watch, and CBP must determine what material or component gives the watch its essential character.
In determining the correct classification of the Grant Connect Watch, CBP observes that the device is constructed of component articles that are, prima facie, classifiable under two or more headings. Specifically, there is no dispute that the Bluetooth module is described by heading 8517, HTSUS, or that heading 9031, HTSUS, describes the accelerometer sensor. Similarly, when the electronic component articles are excluded from consideration, it is not contested that the stainless steel wristwatch is classifiable under the terms of heading 9102, HTSUS. Consequently, because the Grant Connect Watch 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 Apple Watch 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 Grant Connect Watch is primarily a timepiece. The watch face of the Grant Connect Watch is identical to that of an analog chronograph timepiece and, as noted above, does not feature a touch-sensitive LCD or other display common to smart watches of heading 8517, HTSUS. Consequently, when looking at or viewing the Grant Connect Watch, the wearer can only use the device to tell time.
Similarly, because the Grant Connect Watch does not possess an internal hard drive, the wristwatch must be wirelessly paired with an Android or iOS-powered smartphone in order for movement data to be collected, stored, and processed. Due to this requirement, the wearer cannot use the wristwatch to access or review activity-tracking data while the device is in an “unpaired” configuration. Consequently, the function of an unpaired Grant Connect Watch is identical to that of a traditional, analog chronograph wristwatch.
Based on a review of the physical characteristics and function of the Grant Connect Watch, CBP finds that the design and use of the device are dominated by the analog watch face and time-keeping function of the wristwatch. In particular, the absence of a touch-sensitive LCD supports a determination that the device’s data functions are ancillary to its use as an analog chronograph wristwatch. Moreover, while the incorporation of an accelerometer sensor and Bluetooth wireless module distinguish the Grant Connect Watch from other analog chronograph timepieces, CBP emphasizes that none of the Grant Connect Watch’s activity-tracking features can function without first pairing the wristwatch to a smartphone.
Upon consideration of the role of the accelerometer sensor, the Bluetooth wireless module, and wristwatch’s timekeeping function, CBP finds that the essential character of the Grant Connect Watch is imparted by its timekeeping function. Wristwatches with cases of non-precious metal are classified in heading 9102, HTSUS, which provides for “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101.” Accordingly, the Grant Connect Watch is classified in heading 9102, HTSUS, specifically in subheading 9102.11.65.
HOLDING:
By application of GRI 3(b), the Grant Connect Watch and inductive (wireless) charger are classified in heading 9102, HTSUS. Specifically, they are classified in subheading 9102.11.65, HTSUS, which provides for, “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Wrist watches, electrically operated, whether or not incorporating a stop watch facility: With mechanical display only: Other: With strap, band or bracelet of textile material or of base metal, whether or not gold- or silver-plated: Other.” The 2016 column one, general rate of duty for merchandise of subheading 9102.11.65, HTSUS, is 76¢ each + 8.5% on the case + 14% on the strap, band or bracelet + 5.3% on the battery.
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,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division