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HQ 563328




December 29, 2005

CLA-02 RR:CTF:VS 563328 EAC

CATEGORY: CLASSIFICATION

Port Director
U.S. Customs and Border Protection
Port of Newark/New York
C/O Residual Liquidation and Protest Section 1100 Raymond Boulevard
Suite 402
Newark, NJ 07102

RE: Request for Internal Advice; Watch Production Incentive Certificate Claims

Dear Port Director:

This is in response to a request for internal advice from your office dated August 12, 2005, concerning whether imported merchandise qualifies for a refund under the production incentive certificate program for watches. Documents constituting one complete entry package were also submitted for our review.

FACTS:

At issue in this case is whether certain imported articles are eligible for a refund of duties under the provisions of the production incentive certificate program for watches, as amended by the Miscellaneous Trade and Technical Corrections Act of 2004 (Public Law 108-429) (118 Stat. 2434) (2004). As noted above, documents constituting one complete entry package have been submitted for our review. Three entries of the subject merchandise were imported under subheading 9102.11.45, Harmonized Tariff Schedule of the United States (“HTSUS”), and eight entries were imported under subheading 3923.10.00, HTSUS, and subheading 3923.90.00, HTSUS (consisting of plastic watch boxes as noted on the invoices).

ISSUE:

Whether the imported articles identified above are eligible for a refund of duties under the provisions of the production incentive certificate program for watches.

LAW AND ANALYSIS:

The insular possessions watch industry provision in Section 110 of Public Law 97-446 (96 Stat. 2331) (1983), as amended by Section 602 of Public Law 103-465 (108 Stat. 4991) (1994), and Additional U.S. Note 5 to Chapter 91, HTSUS, as amended by Public Law 94-241 (90 Stat. 263) (1976), is a program designed by Congress to stimulate watch assembly activity in the U.S. insular possessions. As noted by U.S. Customs and Border Protection (“CBP”) in T.D. 84-211

T.D. 84-211 finalized an amendment to Part 10, Customs Regulations (19 CFR Part 10), which implemented the provisions of the watch production incentive certificate program for CBP purposes. dated September 12, 1984, the production incentive is in the form of a “production incentive certificate” which can be used to secure the refund of duties paid on qualifying watches, watch movements, and watch parts entered from U.S. insular possessions.

The provisions of the watch production incentive certificate program are found in Additional U.S. Note 5 to Chapter 91, HTSUS. Additional U.S. Note 5(a) to Chapter 91, HTSUS, provides, in pertinent part:

Except as provided in paragraphs (b) through (ij) of this note, any article provided for in this chapter which is the product of the Virgin Islands, Guam and American Somoa (hereinafter referred to as the “insular possessions”) and which contains any foreign component shall be subject to duty:

At the rates set forth in column 1, if the countries of origin of more than 50 percent in value of the foreign components are countries to products of which column rates apply; and

Additional U.S. Note 5(b) to Chapter 91, HTSUS, further provides that:

Watch movements and watches (including watch straps, watch bands, and watch bracelets assembled onto watches) that are produced or manufactured in a United States insular possession which contain any foreign component may be admitted free of duty without regard to the value of the foreign materials such watches contain if they conform with the provisions of this note, but the total quantity of such articles entered free of duty shall not exceed the amounts established by or pursuant to paragraph (d) of this note.

The Department of Commerce, Department of the Interior, and CBP jointly administer the watch production incentive certificate program. In this regard, Additional U.S. Note 5(d)(ii) to Chapter 91, HTSUS, requires that the Secretary of Commerce and the Secretary of the Interior (hereinafter referred to as the “Secretaries”), acting jointly, establish a limit on the quantity of watch and watch movements that may be entered free of duty during the calendar year, and to consider whether such limit is in the best interest of the insular possessions and not inconsistent with domestic or international trade policy considerations.

Of particular importance in this case is Additional U.S. Note 5(h) to Chapter 91, HTSUS. Additional U.S. Note 5(h)(i) generally requires the Secretaries, acting jointly, to verify the wages paid by each producer to permanent residents of the insular possessions during the preceding calendar year and to issue each producer a certificate for the applicable amount. Traditionally, Additional U.S. Note 5(h)(v) See, for example, Additional U.S. Note 5(h)(v) to Chapter 91 of the 2004 HTSUS. provided:

Any certificate issued under subparagraph (I) shall entitle the certificate holder to secure the refund of duties equal to the face value of the certificate on watches, watch movements and, with the exception of discreet cases, parts therefore imported into the customs territory of the United States by the certificate holder. Such refunds shall be made under regulations issued by the Treasury Department. Not more than 5 percent of such refunds may be retained as a reimbursement to the Customs Service for the administrative costs of making the refund.

However, Section 1562(a)(2) of the Miscellaneous Trade and Technical Corrections Act of 2004 amended various subsections of Additional U.S. Note 5(h) to Chapter 91, HTSUS, including subsection (v). In this regard, the Miscellaneous Trade and Technical Corrections Act of 2004 amended subsection (v) so as to provide that any certificate issued under the provisions of the program shall entitle the certificate holder to secure a refund of duties equal to the face value of the certificate on any articles that are imported into the customs territory of the United States by the certificate holder. You inquire as to whether this amendment permits the refund of duties for any articles (such as those under consideration in this case) imported into the United States by a certificate holder.

In considering this issue, we initially note that CBP’s role in administering the watch production incentive certificate program has been to process such certificates upon entry and to refund duties paid on imports of exempt watches accordingly. Section 7.4, Customs Regulations (19 CFR 7.4), sets forth the specific requirements for entering eligible merchandise into the United States under the provisions of the program. Relevant for present purposes is 19 CFR 7.4(a), which provides, in pertinent part, that:
the issuance of an ITA-360, Certificate of Entitlement to Secure the Refund of Duties on Watches and Watch Movements, . authorizes a producer of watches in U.S. insular possessions to file requests with CBP for the refund of duties paid on imports of watches, watch movements (including solid state watches and watch movements), and watch parts (excepting separate watch cases and any articles containing any materials to which rates of duty set forth in Column 2, Harmonized Tariff Schedule of the United States (19 U.S.C. 1202) apply).

The Form ITA-340
The Form ITA-340 in the entry package was certified by the Acting Director, Statutory Import Programs Staff, Department of Commerce. (“Request for Refund of Duties on Watches and Watch Movements”) instructs CBP officials to refund the duties on entries of watches, watch movements (including solid state timepieces whether or not classified in Schedule 7) and parts therefore, with the exceptions of discreet cases and of articles containing any material which is the product of a country with respect to which Column 2 rates of duty apply.

The Department of Commerce and the Department of Interior amended certain sections of Part 303, Commerce and Foreign Trade Regulations (15 CFR Part 303), in order to implement the technical changes required by the Miscellaneous Trade and Technical Corrections Act of 2004. The amendments to Part 303 were published in the Federal Register on November 8, 2005 (70 Fed. Reg. 67645), and became effective on December 8, 2005. Relevant for present purposes is 15 CFR 301.1(a), which as amended states, in pertinent part, that “[t]he law provides for exemption from duty of territorial watches and watch movements without regard to the value of the foreign materials they contain, if they conform with the provisions of U.S. Legal Note 5 to Chapter 91 of the Harmonized Tariff Schedule of the United States.” Moreover, 15 CFR 301.1(c), which was not subject to amendment, continues to state that the law “provides for the issuance to producers of certificates entitling the holder (or any transferee) to obtain duty refunds on watches and watch movements and parts (except discreet watchcases) imported into the customs territory of the United States.”

As noted above, you inquire as to whether any article imported into the United States by a certificate holder is eligible for a refund of duties under the watch production incentive certificate program. In consideration of the information before us, it is our opinion that an article must still conform to the requirements of Additional Note 5 to Chapter 91 of the HTSUS in order to qualify for such treatment. See, 15 CFR 301.1(a). As applied to this case, eight entries were imported under subheading 3923.10.00, HTSUS, which provides for “Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Boxes, cases, crates and similar articles ” and subheading 3923.90.00, HTSUS, which provides for “Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Other”. The remaining three entries were imported under subheading 9102.11.45, HTSUS, which provides for “Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101: Wrist watches, electronically operated, whether or not incorporating a stop watch facility: With mechanical display only: Having no jewels or only one jewel in the movement: Other: Other”. We believe that the merchandise imported under subheadings 3923.10.00 and 3929.90.00, HTSUS, is not eligible for the refund of duties under the watch production incentive certificate program because such products are outside the scope of Chapter 91 and consequently do not satisfy the requirements of Additional U.S. Note 5 to that chapter. However, the merchandise imported under subheading 9102.11.45, HTSUS, would be eligible for the refund of duties under the program provided it conforms to the provisions of Additional U.S. Note 5 and the requirements of 19 CFR 7.4 are otherwise satisfied.

HOLDING:

Based upon the facts of this case, we find that the eight entries of merchandise imported under subheadings 3923.10.00 and 3923.90.00, HTSUS, are not eligible for a refund of duties under the watch production incentive certificate program because such merchandise is outside the scope of Additional U.S. Note 5 to Chapter 91, HTSUS. However, the merchandise entered under subheading 9102.11.45, HTSUS, would be eligible for a refund of duties under the program provided it conforms to the provisions of Additional U.S. Note 5 to Chapter 91, HTSUS, and the requirements of 19 CFR 7.4 are otherwise satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely,

Monika R. Brenner, Chief

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