Duty Rate on Repaired Reimports Based on Original Rate at Import, CBP Tells Tiffany

The duty rate for Tiffany & Co. watches that are imported following export for repair can be calculated based upon the rate when first imported, CBP said in a Dec. 1 ruling. The ruling, HQ H288749, came in response to an internal advice request from the Consumer Products and Mass Merchandising Center of Excellence and Expertise. The company sought CBP input on the duties owed on the repairs.

Tiffany provided a hypothetical scenario in which a watch valued at $5,003 was entered in subheading 9102.21.7010 with duties owed of $134.61. Those duties include "$1.53 plus $84.05 for the case, plus $49.03 for the strap." Following import, the company discovered a flaw with the watch's movement and returned it for repair in Switzerland. The repair is valued at $360, Tiffany said. The watch is then imported again in subheading 9802.00.40 or subheading 9802.00.50, depending on whether the flaw is covered by warranty, the company said. Both subheadings provide that the rate of duty is “[a] duty upon the value of the repairs or alterations.”

The duty rate is calculated by following the instructions of U.S. Note 3(c) to Subchapter II of Chapter 98, CBP said. In this case, that means "calculating an ad valorem rate that is equivalent to the compound rate of duty on the full value of the watch" and "applying this ad valorem rate to the value of the repairs conducted in Switzerland." That first step requires "finding an ad valorem rate of duty that is equivalent to the $134.61 of duties owed when applying the compound rate of duty," CBP said.

The $134.61 in duties owned on the watch in the scenario is about 2.7% of $5,003, CBP said. "Therefore, 2.7% is the ad valorem rate of duty to be applied to the full value of the watch that will provide the same amount of duties as the compound rate of duty." The ad valorem rate would then be applied to the value of the repair, CBP said. "Applying a 2.7% ad valorem rate of duty to the $360.00 in repairs results in $9.72 in duties owed for the example transaction when the watch is returned," the agency said.