On May 18, 2016 the Commercial Court of Moscow rendered a decision on the customs dispute of Apple Rus LLC (the “Company”) over the classification of Apple Watch devices according to the unified Foreign Economic Activity Commodity Nomenclature of the Eurasian Economic Union (FEACN of the EAEU) (case No. А40-32818/16).

Based on the court decision, further to the Company’s application the customs authority made advance rulings to classify personal wireless receiving and transmitting wearable Apple Watch devices under the following FEACN of the EAEU codes:

  • 9102 12 000 0 – “electrically operated wristwatches with or without a built-in stopwatch, with optical-electronic display only,” import customs duty rate 10%;
  • 9102 19 000 0 – “electrically operated wristwatches with or without a built-in stopwatch, other,” import customs duty rate – 7%.

For its part, the Company stated that Apple Watches should be classified under commodity heading 8517 (subheading 8517 62) as “machines for the reception, conversion and transmission or restoration of voice, images or other data, including switching devices and routers” under the General Rules of Interpretation of the FEACN of the EAEU 3b because the wireless data sharing module is a component part that is a key feature of the product. The import customs duty rate is 0%.

The court considered the customs authority’s position to be more substantiated based on the following:

  • The Apple Watch, as a wireless device, is capable of performing different functions that are independent of one another; at the same time, it does not seem possible to identify a single key and significant function determining the purpose; thus, it is not possible to apply General Rules of Interpretation of the FEACN of the EAEU 3b in classification.
  • The Apple Watch should be classified in accordance with the next General Rules of Interpretation of the FEACN of the EAEU 3c, according to which it is necessary to determine codes for each equivalent function performed and choose the code that is the last in ascending order.

A further argument that the Apple Watch is correctly classified as a watch (chasy), in the court’s opinion, is the well-known fact that the device is worn on the wrist, is a band, shows the time, and the name Watch translated from the English means “chasy.”

The court considered the fact that the customs authorities classify the Apple Watch under commodity heading 8517 in many countries (the United States, Canada, Japan, Turkey, Ireland, etc.) irrelevant to the subject matter of the dispute.

The court’s decision on this case shows once again that the issue of classifying goods continues to be one of the most controversial issues in customs relations.