Swiss Watch Importer Argues Its Watches Have Precious Metal Cases, Are Classifiable as Such

In a long-delayed motion for summary judgment in a case that began in 2018, a Swiss watch importer argued that CBP had relied on the wrong definitions of "watch crystal” and “watch case” when it misclassified its entries at a higher duty rate (Ildico Inc. v. U.S., CIT #s 18-00136, -00076).

Ildico filed a brief March 12 at the Court of International Trade arguing that its Richard Mille watches should be classified under Harmonized Tariff Schedule heading 9101, as watches with cases made out of precious metals, rather than under heading 9102, the basket watch provision that CBP liquidated its entries under.

The case has dragged on for some time, due in part to a tangled discovery process that prompted sanctions from CIT Judge Jane Restani (see 2401290024).

Under the first general rule of interpretation in the tariff schedule, CBP should first test goods against more specific headings to see if they fit before moving on to basket provisions, Ildico said. If its watches fit under the more-specific heading 9101, they could not be classified under 9102, it said.

Ildico argued that its watches do fit under the more specific heading, which covers “wrist watches, pocket watches and other watches… with case of precious metal or of metal clad with precious metal,” because they are built with gold watch cases.

According to the chapter notes, watch cases have up to three principal parts: bezels, middle cases and case backs, Ildico said. To fall under the heading, “the principal parts of the watch case” must be “wholly of precious metals,” it said.

Certain components of watches, such as watch crystals, screws and gaskets, may be attached to the merchandise to seal the watch cases, but aren't considered part of them under the tariff schedule, it said. Therefore, “they do not determine whether a case is wholly of gold under heading 9101,” it said.

All three parts of Ildico’s Richard Mille watch cases are made entirely out of 18 karat red or white gold, the importer said. The products’ case backs also include transparent synthetic sapphire watch crystals, which lets customers “see into the watch and observe the aesthetics, the craftmanship and the functioning of the inner workings of the watch movement.”

CBP determined that Ildico’s watch cases were not primarily made out of precious metal because the crystals on the case backs were synthetic, it said.

However, the agency was wrong because “it limited the definition of a crystal to only one found on the front of the watch case” after only a “cursory review of its own research,” Ildico said. It argued that the watches’ case backs were also mounted with watch crystals -- which the tariff schedule specifically excluded from being considered part of the cases. The fact that the crystals weren't made of precious metal didn't mean the cases were, it said.

The professional dictionary of the Swiss watch industry, the FH Professional Dictionary of Horology, indicates that watch crystals can be mounted to case backs, it said. Also, “ironically, the Government produced additional lexicographic resources which explain that a watch can have a crystal, not just on the front of the watch, but also on the back” during discovery, Ildico said, citing The Watch Pages and Windgate’s Watch Dictionary.

The importer argued that CBP had previously ruled that another watch with a back crystal was classifiable under the specific heading. That watch had a sapphire crystal on its back, but CBP “concluded that the watch with a ‘white gold case’ is classified under heading 9101,” it said.

“Accordingly, NY Customs agreed that watches with back crystals are classified under 9101,” Ildico said. “This ruling is still available through Custom[s] Ruling[s] Online Search System (CROSS). It is still the official position of Customs and warrants some deference with respect to consistency with how the agency's interpretation of heading 9101 should be applied to Ildico's watches with the same feature.”