UNITED STATES COURT OF INTERNATIONAL TRADE

Slip Op. 24-123

Before the Court in Ildico Inc. v. United States, Court No. 18-00136, Slip Op. 24-123 (November 1, 2024) were cross motions for summary judgement by the parties on the question of whether the cases of the watches imported by Ildico are “wholly of” precious metal.

Ildico argued that because the principal parts of the case are made of eighteen-karat gold, the watch and its requisite components are properly classified under subheading 9101, HTSUS. On the other hand, the government contended that the heading 9102, HTSUS was appropriate because the Harmonized Tariff Schedule uses a broad definition of “case” the cases include parts not made of precious metals such as the sapphire crystal backs or screws.

The Court of International Trade decided the case pursuant to its jurisdiction under 28 U.S.C. § 1581(a) (2018). Pursuant to USCIT Rule 56(a), the court will grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Summary judgment is appropriate in tariff classification cases where no genuine dispute as to the nature of the merchandise exists and the classification turns on the proper meaning and scope of the relevant tariff provisions. In the instant case, the court first looked at the legal framework for the tariff classification dispute, which provides that the plaintiff has the burden of demonstrating that the government’s classification is incorrect but does not bear the burden of establishing the correct classification. Notably, the court has a statutory mandate to reach a correct result independent of the arguments presented. In a tariff classification case, the court first considers whether the government’s classification is correct, both independently and in comparison with the importer’s alternative. The court then determines the meaning of the tariff term as a matter of law and examines the factual question of whether the subject merchandise is properly defined by that term. To determine the meaning of and apply a tariff term to the facts, the court applies the General Rules of Interpretation (“GRIs”) and, if applicable, the Additional U.S. Rules of Interpretation, and it does so in numerical order. The court noted GRI 1, which requires classification to “be determined according to the terms of the headings and any relative section or chapter notes.” GRI 1, HTSUS. Furthermore, the court reads the HTSUS as a comprehensive document, the provisions of which should be read consistently and complementary to one another. The court considers the common and commercial meanings of tariff terms, and construes the meaning of the HTSUS in the light of commercial realities and the real-world context of the industries in which the subject merchandise exists. Within this legal framework, the court analyzed the competing tariff provisions at issue in the classification of the watch cases.

The court found that the watches properly fall under heading 9102 of the HTSUS. In its assessments, the court considered the government’s arguments that eighteen-karat gold is not pure gold and therefore the watch cases are not “wholly of” precious metal, that certain parts that operate the watch are part of the case, that certain case sealing features such as the rubber sealing gasket and the steel flange that hold it renders the case not of precious metal. These arguments were abandoned by the government. Two case features that arguably must be of precious metal for classification under heading 9101 remained, however: the watch back crystal and the visible screws that fasten the front and body of the case together.

The court concluded that the watches are watches with cases of material other than precious metal classified in heading 9102, HTSUS because the synthetic sapphire crystal back is part of the watch case. The court reasoned that while a watch glass on the front of a watch is not part of the case, a watch glass on the back of a watch is part of the case and renders the case not “wholly of” precious metal. The court noted that it refrains from resolving the question of whether various other parts need to be of precious metal as the crystal back watch glass defeats classification in heading 9101. Specifically, the issue of whether titanium screws render the watch case not “wholly of” precious metal remained unresolved because the court does not know the composition of the screws. In order to resolve this question, the court stated it would need to hear evidence on what the industry considers a watch case or watch case body to be and whether  precious metal screws are successfully used in watches.