H305372

HQ H305372 January 17, 2020 OT:RR:CTF:VS H305372 CMR CATEGORY: Valuation TARIFF NO.: 9101.21; 9102.21 Center Director Consumer Products and Mass Merchandising Center of Excellence and Expertise U.S. Customs & Border Protection 157 Tradeport Drive, Suite B Atlanta, GA 30354 RE: Application for Further Review and Protest No. 2095-18-102743; Valuation of watch components Dear Center Director: This is in response to the Application for Further Review (AFR) and Protest No. 2095-18-102743 filed on behalf of U Save On Time, by its counsel, against the decision of the Consumer Products and Mass Merchandising Center of Excellence and Expertise (CEE) to rate advance imported watches by reapportioning the declared value among the watch components comprising each watch. While the Automated Commercial Environment system (ACE) indicates that 40 entries are at issue, we note that the protestant lists 41 entries. The protest was timely filed within 180 days of the liquidation dates. The AFR was properly approved as the protestant relies upon 19 CFR § 174.24(a) and cites to Headquarters Ruling Letter (HQ) H259490, dated April 4, 2017 in the argument for their position. FACTS: The merchandise in the entries at issue in this protest consist of various styles and models of Rolex wrist watches. The merchandise was entered under subheadings 9101.21, Harmonized Tariff Schedule of the United States (HTSUS) and 9102.21, HTSUS. These subheadings provide for “Wrist watches, pocket watches and other watches, including stop watches, with case of precious metal or of metal clad with precious metal: Other wrist watches, whether or not incorporating a stop watch facility: With automatic winding”, and “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Other wrist watches, whether or not incorporating a stop watch facility: With automatic winding”, respectively. Watches classifiable in these subheadings are assessed duty based upon the constructive segregation of their components with duty assessed upon the individual components of the watches and not upon the entered watches themselves. As duty is assessed on the individual components, and not the watches, the declared value of the watches was allocated among the components, i.e., the movements, the cases, and the straps, upon which duty is assessed. We were informed by counsel that the watches are of “gold or stainless steel” and have Swiss movements. In addition, counsel stated that all of the subject watches include more than 17 jewels in the movement. The company apportions the component valuation as 85 percent on the movement, 10 percent on the case, and 5 percent on the bracelet. In addition, counsel stated that “[v]irtually all imported watches would have metal bracelets, not rubber or leather straps.” A review of the entries by Customs and Border Protection (CBP) personnel revealed that in all entries, the protestant used the same watch component percentage value allocations regardless of the type, value, or classification of the entered watches. CBP personnel believe that the watch component value apportionments are inconsistent with component value apportionments of other merchandise of the same class or kind and classified in the same or similar provisions. CBP Form 29s for proposed action were sent and CBP received no reply. The entries were rate advanced. The protestant paid the billed additional duties and filed this protest. This office requested additional information regarding the specific watches at issue in this protest. Other than being told that the merchandise consists of authentic Rolex watches, and being provided with a list of the most common models imported by the protestant, this office was unable to obtain any additional information regarding the transactions which resulted in the importation of the subject watches. For instance, the protestant was unable to inform this office which specific models were in the entries at issue and whether the watches were new, used, refurbished or shopworn. Counsel submits that the protestant’s component value allocations should be accepted by CBP because the protestant used the same methodology as allowed by CBP in Headquarters Ruling Letter (HQ) H259490, dated April 4, 2017, wherein the importer deducted the costs of the watch case, strap or band, and battery to determine the value of the watch movement. Counsel submits that the protestant “has implemented a procedure whereby it verifies the value of similar components available in the market.” As an example of the protestant’s methodology, counsel refers to the availability of watch batteries on the open market and their “costs are readily obtainable through the internet.” In addition, counsel stated: “Petitioner has verified the available sourcing costs of identical leather, rubber, textile and metal bands and straps through countless suppliers and years of experience in the trade.” Further, as in HQ H259490, the protestant “sums up the values of the case, strap/band/bracelet and battery, and deducts it from the transaction value of the complete watch to determine the statistical reporting value attributable to the movement subheading.” According to counsel, “[t]his methodology allows for the full declaration of unknown intangible costs of the finished watch including marketing, advertising, warehousing, transportation, design, intellectual property, development, testing, etc. [.]” ISSUE: Whether the CEE improperly rejected the importer’s allocation of the values of their imported watches to the watches’ components. LAW AND ANALYSIS: Merchandise imported into the United States is appraised in accordance with Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). The duty assessed upon imported merchandise is most often, though not always, based upon a percentage of the appraised value of the merchandise, i.e., an ad valorem duty. Watches are classified in Chapter 91, HTSUS. The Additional U.S. Notes to Chapter 91 inform us as to the elements of a watch. Specifically, Additional U.S. Note 1 provides: For the purposes of this chapter: The term "watches" embraces timepieces (including timepieces having special features, such as chronographs, calendar watches and watches designed for use in skin diving) of a kind for wearing or carrying on the person whether or not the movement contained therein conforms to the definition of "watch movements" in note 3, above. Timepieces incorporating a stand, however simple, are not classifiable as watches. We note that this is essentially the same definition of “watches” provided in the prior Tariff Schedules of the United States, with minor differences. Additional U.S. Note 2 provides: Watch straps, watch bands and watch bracelets entered with wrist watches and of a kind normally sold therewith, whether or not attached, are classified with the watch in heading 9101 or 9102. Otherwise, watch straps, watch bands and watch bracelets shall be classified in heading 9113. A careful reading of these notes reveals that a watch containing a movement, for tariff purposes, consists of the movement and case. The watch strap, band or bracelet is not considered part of the watch. See also, The Harmonized Commodity and Coding System Explanatory Notes, Chapter 91, General Notes, which state, in relevant part: A clock or watch is composed of two main parts: the movement and the container for the movement (case, cabinet, etc.). Further, the Explanatory Notes (EN), state with regard to heading 9102, that: Wrist-straps presented with their watches (whether or not attached) are classified in this heading This is in keeping with the historical treatment of

Merchandise imported into the United States is appraised in accordance with Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). The duty assessed upon imported merchandise is most often, though not always, based upon a percentage of the appraised value of the merchandise, i.e., an ad valorem duty. Watches are classified in Chapter 91, HTSUS. The Additional U.S. Notes to Chapter 91 inform us as to the elements of a watch. Specifically, Additional U.S. Note 1 provides: For the purposes of this chapter:The term "watches" embraces timepieces (including timepieces having special features, such as chronographs, calendar watches and watches designed for use in skin diving) of a kind for wearing or carrying on the person whether or not the movement contained therein conforms to the definition of "watch movements" in note 3, above. Timepieces incorporating a stand, however simple, are not classifiable as watches.We note that this is essentially the same definition of “watches” provided in the prior Tariff Schedules of the United States, with minor differences. Additional U.S. Note 2 provides:Watch straps, watch bands and watch bracelets entered with wrist watches and of a kind normally sold therewith, whether or not attached, are classified with the watch in heading 9101 or 9102. Otherwise, watch straps, watch bands and watch bracelets shall be classified in heading 9113.A careful reading of these notes reveals that a watch containing a movement, for tariff purposes, consists of the movement and case. The watch strap, band or bracelet is not considered part of the watch. See also, The Harmonized Commodity and Coding System Explanatory Notes, Chapter 91, General Notes, which stat