H326900

H326900 October 9, 2025 OT:RR:CTF:VS H326900 AMW CATEGORY: Valuation Director Consumer Products and Mass Merchandising CEE U.S. Customs and Border Protection 1500 Centre Pkwy Atlanta, GA 30344 C/O Paul Sumbi, Assistant Center Director RE: Protest and Application for Further Review of 2720-20-101252; Valuation of Imported Watch Components; Statistical Note 1, Chapter 91, HTSUS Dear Director: This is in response to the Application for Further Review (“AFR”) of Protest No. 2720- 20-101252, dated January 31, 2020, filed against U.S. Customs and Border Protection’s (“CBP’s”) decision to liquidate the subject imported wrist watches based on a revised apportionment of the value of the underlying components in accordance with Statistical Note 1, Chapter 91, Harmonized Tariff Schedule of the United States (“HTSUS”). The Protestant, [xx] (“[xx]” or the “Protestant”), seeks reliquidation at the component valuation declared at entry. FACTS: This protest relates to approximately 84 entries of wrist watches imported by the Protestant’s [xx] Division (“[xx]” or the “Subsidiary”) during the year 2018. The subject watches were typically purchased completely assembled from unrelated suppliers. However, the protest asserts that the Subsidiary “plays an active role in the design of all watches that bear the [xx] name and trademark.” Upon purchase, the Protestant states that each vendor provided the Subsidiary with an invoice and an allocation of the purchase price to the various statistically enumerated components of each watch purchased, all of which accompanied the imported goods. The Subsidiary based the component allocation reported to CBP on the invoice and apportionment representations provided by its suppliers.1 As outlined in the subject entries, the 1 Per [xx] protest, since April 2019, all Subsidiary-brand watches are purchased by the Subsidiary from [xx] and the Subsidiary no longer deals directly with third-party assemblers. All of the subject entries predate this arrangement, however. Protestant declared most of the watches as originating in Japan and exported to the United States via Hong Kong. The Protestant declared the valuation of the subject watches to be the transaction value between the Subsidiary and the watches’ manufacturers. However, regarding the Statistical Note 1, Chapter 91, HTSUS, component apportionment, CBP reliquidated the subject watches in 2020, assessing new component valuation apportionments for the underlying entries. CBP’s decision to reliquidate the entries followed an audit regarding the import practices of the Protestant. In 2017 and 2018, CBP’s Trade Regulatory Audit (“TRA”) audited entries of watches by the Protestant for the period of 2013-2017. In so doing, TRA determined that the Protestant, “did not provide cost production records or any other supporting documentation to reasonably support their apportionment of the value of the watch components….” Instead, TRA found that the valuation attributed to the movement for similar “compliant companies” averaged approximately 33% of the watches’ total value for the scope period of 2013 to 2017, which represented a significant departure from the 70%-75% reported by the Protestant. CBP then reliquidated the subject 2018 entries in accordance with TRA’s findings. Although the audit only reviewed practices related to the Protestant’s importation of [xx]-brand watches, and seemingly did not relate to [xx]-brand products, CBP also subsequently reliquidated the subject entries of watches imported by the Subsidiary. In reapportioning the valuation of the imported watch components, TRA utilized Reapportionment Percentages Constructed from Arithmetic Means of Stratified Entry Parameters (“RPCARSEP”). RPCARSEP is maintained by the Consumer Products and Mass Merchandising CEE (the “CEE”) and is used to assess the valuation for imported watch components when complete information is otherwise unavailable. In relevant part, RPCARSEP consists of hundreds of thousands of lines of entry data for watches imported by “compliant” importers (i.e., those importers that have demonstrated reasonable apportionment and value compliance based on verification of underlying production records). These data points may then be used to calculate the average valuation proportion for each component of a watch based on the following parameters: price range, year of import, country of origin, and classification. The CEE has also clarified that revised percentages are only calculated for watches for which there exist direct or reasonably comparable products represented in the underlying dataset (i.e., within the same price range, year of importation, country of origin, and classification). If no direct or reasonably adjusted comparison can be made from the data available, then no adjustment is made and CBP will accept the original valuation. The Protestant challenges CBP’s assessment on several bases, which can be divided into two categories: (1) that its initial means of valuing the watch components was a reasonable method of appraisal previously accepted by CBP; and (2) that CBP erred in using the RPCARSEP to reapportion the component value of the imported watches. 2 ISSUE: 1. Whether the Protestant correctly apportioned the valuation of the watch components in compliance with Statistical Note 1, Chapter 91, of the HTSUS? 2. Whether CBP’s use of the RPCRSEP to reallocate the component valuation complied with Statistical Note 1, Chapter 91, HTSUS? LAW AND ANALYSIS: As an initial matter, we note that the protest was timely filed on January 1, 2020, within 180 days of liquidation of the entry on September 13, 2019, under the statutory provisions for protests. See 19 U.S.C. §1514(c)(3). Merchandise imported into the United States is appraised for customs purposes 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 primary 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 amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. See 19 U.S.C. § 1401a(b)(1). As provided in 19 U.S.C. §1401a(b)(4): (A) The term “price actually paid or payable” means the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. Section 152.103(a)(1), CBP Regulations (19 CFR §152.103(a)(1)) provides, in pertinent part, as follows: In determining transaction value, the price actually paid or payable will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market. When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. (19 U.S.C. § 1401a(a)(1)). The alternative bases of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed value (19 U.S.C. § 1401a(e)); and the “fallback” method (19 U.S.C. § 1401a(f)). 3 In the present matter, as noted above, the Protestant utilized the transaction value in reporting the total value of each imported watch. The Subsidiary purchased the imported watches from unrelated manufacturers, and the overall valuation of the subject watches was not changed when the merchandise was reliquid

As an initial matter, we note that the protest was timely filed on January 1, 2020, within 180 days of liquidation of the entry on September 13, 2019, under the statutory provisions for protests. See 19 U.S.C. §1514(c)(3). Merchandise imported into the United States is appraised for customs purposes 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 primary 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 amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. See 19 U.S.C. § 1401a(b)(1). As provided in 19 U.S.C. §1401a(b)(4): (A) The term “price actually paid or payable” means the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. Section 152.103(a)(1), CBP Regulations (19 CFR §152.103(a)(1)) provides, in pertinent part, as follows: In determining transaction value, the price actually paid or payable will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market. When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. (19 U.S.C. § 1401a(a)(1)). The alternative bases of appraisement, in order of precedence, are: the transaction value of i