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HQ 563442





February 24, 2006

CLA-02 RR:CTF:VS 563442 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: Revocation of HRL 563328 dated December 29, 2005; Watch Production Incentive Certificate Program.

Dear Port Director:

This is in reference to Headquarters Ruling Letter (“HRL”) 563328 dated December 29, 2005, concerning whether imported merchandise qualifies for a refund of duties under the provisions of the watch production incentive certificate program. In HRL 563328, U.S. Customs and Border Protection (“CBP”) held that merchandise imported under subheadings 3923.10.00 and 3923.90.00, Harmonized Tariff Schedule of the United States (“HTSUS”), was not eligible for a refund of duties under the program whereas merchandise imported under subheading 9102.11.45, HTSUS, was eligible. Upon review of HRL 563328, CBP has determined that the merchandise imported under subheadings 3923.10.00 and 3923.90.00, HTSUS, is eligible for a refund of duties under the provisions of the program. Therefore, this ruling revokes HRL 563328.

Pursuant to section 625(c), Tariff Act of 1930 (19 U.S.C. §1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of proposed revocation of HRL 563328 is not necessary as it has not been in effect for at least 60 days.

FACTS:

At issue in this case is whether certain imported articles are eligible for a refund of duties under the provisions of the watch production incentive certificate program, as amended by the Miscellaneous Trade and Technical Corrections Act of 2004 (Public Law 108-429) (118 Stat. 2434) (2004). 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, HTSUS, and eight entries were imported under subheadings 3923.10.00 and 3923.90.00, HTSUS (consisting of plastic watch boxes as noted on the invoices). The entries at issue are dated April 13, 2003, through July 6, 2004.

ISSUE:

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

LAW AND ANALYSIS:

Congress created the insular possessions watch program in 1966 to stimulate watch assembly activity in the U.S. insular possessions. See, Public Law 89-805 (1966), amended by Section 110 of Public Law 97-446 (96 Stat. 2331) (1983), 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) and Section 1562 of Public Law 108-429 (2004). The Department of Commerce, Department of the Interior, and CBP jointly administer the insular possessions watch program.

The provisions of the watch production incentive certificate program are found in Additional U.S. Note 5 to Chapter 91, HTSUS. The watch program grants two primary benefits to insular possessions watch producers. Under the program, eligible insular possessions watch producers are given an annual allocation of watches and watch movements that may enter the United States free of duty. See, Additional U.S. Note 5(b) to Chapter 91, HTSUS. Insular possessions watch producers are also eligible to receive a production incentive certificate, which, prior to 2004, authorized a duty refund from CBP on non-column 2 watch movements, watches, and parts therefore which entered the United States duty paid. See, Public Law 97-446 (1983). Because the watches and watch movements already received duty-free treatment, watch producers could transfer the certificate to another company for consideration.

In December 2004, Congress amended the watch program to permit production incentive certificate holders to secure a duty refund on any articles (rather than just watches, watch movements, and watch parts) that are imported into the customs territory of the United States by the certificate holder duty paid. See, Public Law 108-429 (2004). Additional Note 5(h)(v) to Chapter 91, HTSUS, provides, in pertinent part:

Any certificate issued under subparagraph (i) 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. 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.

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 303.12(c), which as amended states, in pertinent part, that:

The use and transfer of certificates of entitlements. (1) Insular producers issued a certificate may request a refund by executing Form ITA-361P (see 303.2(b)(5) and the instructions on the form). After authentication by the Department of Commerce, Form ITA-361P may be used to obtain duty refunds on articles that entered the customs territory of the United States duty paid except for any article containing a material which is the product of a country to which column 2 rates of duty apply

Pursuant to 15 CFR 303.12, as amended, except for articles containing materials that are a product of a country to which column 2 rates of duty apply, 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 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”. In consideration of the foregoing, it is our belief that the merchandise imported under subheadings 3923.10.00, 3929.90.00, and 9102.11.45, HTSUS, is eligible for the refund of duties under the watch production incentive certificate program because such products do not contain materials which are a product of a country to which column 2 rates of duty apply and the duties paid on those products do not exceed the value of the production incentive certificate. It is further noted that the subject entries were made on or after January 1, 2003, in accordance with the requirements set forth in Public Law 108-429 (2004).

HOLDING:

Based upon the information provided, we find that the merchandise imported under subheadings 3923.10.00, 3923.90.00, and 9102.11.45, HTSUS, is eligible for a refund of duties under the watch production incentive certificate program because the duties paid do not exceed the value of the production incentive certificate held by the importer and the merchandise does not contain materials produced in a non-column 2 country.

HRL 563328 is hereby revoked. As HRL 563328 has not been in effect for at least 60 days, this ruling will not require publication in the Customs Bulletin in accordance with 19 U.S.C. §1625(c).

Sincerely,

Myles B. Harmon, Director

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