Overview
U.S. Customs and Border Protection (“CBP”) recently issued a ruling on the classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of Apple Watch Bands. In the ruling, CBP concluded that the watch bands properly are classified under heading 9113, which specifically covers “watch bands” and “watch straps”. CBP declined Apple’s request that the watch bands be classified under heading 8517, for parts of a radio transceiver – or, in other words, parts of an Apple Watch. These HTS classifications have commercial significance because the usual duty rate for products in heading 9113 ranges from 1.8 percent to 11.2 percent, but the duty rate for products in subheading 8517.70 (for parts of a radio transceiver) is zero.
This ruling underscores a key classification principle, from Rule 1 of the General Rules of Interpretation (“GRI 1”) of the Harmonized System. GRI 1 requires that the first place to look when determining an item’s classification is “the terms of the {four-digit} headings and any relative Section or Chapter Notes.” In other words, to determine classification one must turn first to the four-digit tariff schedule headings, and any section or chapter notes for that heading. Only then, as CBP reminds in the watch band ruling, “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.” In other words, if the language of a heading, at the four digit level, matches the product in its condition as imported, then the product is properly classified somewhere in that heading, without looking at other headings, other subheadings, or other GRIs.
CBP did not find it necessary to go beyond GRI 1 when making its determination that the Apple Watch Bands were “watch bands” in heading 9113, rather than parts of a radio transceiver (that is, of an Apple Watch) in heading 8517. After looking at the terms of the four-digit headings, and the relevant section and chapter notes, CBP determined that the bands were classifiable in heading 9113. That meant they could not be classified under heading 8517 as parts of a radio transceiver. Indeed, CBP noted that items classifiable under Chapter 91 are explicitly excluded from Chapter 85 by a section note.
This ruling is intriguing because the decision was much closer that it may seem at first glance. Apple provided two key points to support its argument that the bands were, in fact, a “part” of a radio transceiver, rather than “watch bands”. First, the bands were specifically designed only for the Apple Watch and would not fit other wearable devices. Second, the Apple Watch has some functions that required the watch to be affixed to the wrist.
However, two other factors pointed CBP toward a finding that the bands were simply “watch bands.” First, CBP already determined in a prior ruling that the “essential character” of an Apple Watch was imparted by its radio transceiver, and in this ruling CBP found that transceiver did not need the bands to function. Second, the Apple Watch Bands attached the watch to the user’s wrist, just like any conventional watch band.
In some instances, for complicated or interesting products, importers may be tempted to jump past the headings to a classification subheading that seems to fit or to use a more advanced GRI when there is uncertainty. This ruling demonstrates that when it comes to tariff classification, even for advanced products, the most basic, fundamental rules of classification, starting with GRI 1, continue to control the analysis.
For more information regarding this subject, please contact Greg McCue, at +1 202 429 6421, or Cherie Tremaine, at +1 202 429 1308, in Steptoe’s Customs practice in our Washington office.
