Smartwatch and replaceable watch band import classification: device treated as telecom under CTH 8517 62 90; bands ruling refused

On classification of a smart watch device, the AAR held that, despite multiple functions, its principal function is wireless transmission/reception of voice, images and other data as an extension of a paired smartphone; applying Heading 8517 and noting the WCO HS Committee's view, it reaffirmed classification under CTH 8517 62 90 and renewed the earlier ruling for three years. On classification of interchangeable watch bands (including leather and other materials), the AAR declined to pronounce any ruling because a pending SCN created a statutory bar under the proviso to s. 28-I(2) of the Customs Act, 1962, granting liberty to seek a ruling after the dispute is resolved.

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Issues: (i) Whether the earlier Advance Ruling AAR/CUS/12/2016 (2016) classifying Apple Watch under CTH 8517 62 90 should be renewed for a further three years; (ii) Whether the Advance Ruling for parts of Apple Watch, namely bands made of fluoroelastomer, stainless steel or other non-leather materials, should be renewed as classified under CTH 8517 79 90; (iii) Whether Apple Watch bands made of leather are classifiable under CTH 4205 00 90.

Issue (i): Renewal of the 2016 Advance Ruling for classification of Apple Watch under CTH 8517 62 90.

Analysis: The principal function test and applicable General Rules for Interpretation were applied along with Section and Chapter notes and WCO and other administrative rulings relied on in the record. The device transmits and receives voice, images and other data and functions as an extension of a paired mobile device; Note 3 to Section XVI supports classification according to the principal function. Departmental representative agreed with classification under Heading 8517. The WCO Harmonized System Committee decision and prior AAR order support classification under 8517 62 90.

Conclusion: The renewal of the Advance Ruling for Apple Watch under CTH 8517 62 90 is affirmed in favour of the applicant.

Issue (ii): Renewal of the 2016 Advance Ruling for parts, namely bands (non-leather), under CTH 8517 79 90.

Analysis: Although the applicant argued that bands are parts suitable solely/principally for the device and fall under Section Note 2(b) to Chapter 85, a Show Cause Notice challenging the classification of the bands was pending before the adjudicating authority at the time of decision. Proviso (b) to Section 281(2) of the Customs Act bars allowing an application where the question is the same as in a matter already pending before any officer of customs or appellate forum. The pending SCN therefore precludes pronouncing a ruling on this issue at present.

Conclusion: The application for renewal in respect of bands (non-leather) is not allowed at this time; no ruling is made on this issue.

Issue (iii): Classification of Apple Watch bands made of leather under CTH 4205 00 90.

Analysis: Applicant relied on Chapter 42 provisions and the exclusion in Note 1(b) to Section XVI that articles of leather are excluded from Chapter 85. However, the same bar under Proviso (b) to Section 281(2) applies because the classification of leather bands is subject to the pending SCN and related proceedings; accordingly the Authority refrained from ruling on this contested issue.

Conclusion: The application for a ruling on leather bands under CTH 4205 00 90 is not allowed at this time; no ruling is made on this issue.

Final Conclusion: The Authority renews the earlier Advance Ruling solely in respect of the classification of the Apple Watch under CTH 8517 62 90; issues concerning classification of bands (non-leather) and leather bands are not adjudicated due to the pendency of proceedings before the customs adjudicating authority and are left open for determination after resolution of those proceedings.

Ratio Decidendi: Where an advance ruling question depends on the principal function of a composite device, classification follows the component performing the principal function; however, an authority must refuse to allow an advance ruling application where the same question is already pending in the applicant's case before a customs officer or tribunal under the proviso to Section 281(2) of the Customs Act, 1962.

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