Section 301 Tariffs on Certain Mainland Chinese Watch Cases Could Be Removed

A recent proposal from U.S. Customs and Border Protection would eliminate Section 301 tariffs on certain watch cases made in mainland China. This proposal would also affect continued eligibility for duty preferences when these components are manufactured under free trade agreements or preference programmes incorporating a substantial transformation rule of origin test.

Rulings HQ H304105 and HQ H047115 relate to country of origin determinations, including origin determinations for Section 301 tariff purposes, where watch straps, bands, bracelets and cases made in mainland China are assembled into wristwatches that incorporate non-mainland Chinese origin movements.

It is long-standing CBP policy that the country of origin of a watch is based on the country of origin of its movement. CBP held in the subject rulings that if a watch case, strap, band or bracelet is assembled with the movement in a country other than the country of origin of the movement, the case, strap, band or bracelet will be considered, for tariff purposes, to remain a product of the country in which it was originally manufactured. These rulings have resulted in the imposition of additional Section 301 tariffs on the value of mainland Chinese-origin watch components used in the manufacture of watches with non-mainland Chinese origin movements when assembly of the watch is completed in a country other than the country of origin of the movement.

As a result of a request for reconsideration, CBP is proposing to modify these rulings and any prior treatment. Specifically, CBP intends to consider watch cases assembled into a completed watch substantially transformed into a new and different article of commerce without regard to whether the final assembly occurs in the same country as the country of origin of the movement. This change would effectively eliminate Section 301 tariffs on watch cases made in mainland China in such cases. However, CBP continues to believe that assembled watch straps, bands and bracelets are undeserving of similar treatment, explaining that “for tariff purposes a watch consists of the movement and the case…[but] does not by definition include a band, strap or bracelet.”

Comments on this proposal, including those requesting that CBP afford similar treatment to watch straps, bands and bracelets assembled into completed watches, are due by 30 April.