Background

Modifications to two U.S. Customs and Border Protection rulings will eliminate Section 301 tariffs on certain watch cases made in China and affect continued eligibility for duty preferences when these components are manufactured under free trade agreements or preference programs 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 China are assembled into wristwatches that incorporate non-Chinese origin movements.

It is longstanding 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 Chinese-origin watch components used in the manufacture of watches with non-Chinese origin movements when assembly of the watch is completed in a country other than the country of origin of the movement.

CBP has now issued ruling HQ 306338 to modify these rulings and any prior treatment. Specifically, CBP now considers 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 will effectively eliminate Section 301 tariffs on watch cases made in China and assembled with non-Chinese origin movements.

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.”

For more information, please contact attorneys Louis Shoichet (at (212) 549-0136 or via email), Lenny Feldman (at (305) 894-1011 or via email), or Charles Crowley (at (212) 549-0134 or via email).

Click here for ST&R’s on-demand webinar on duty savings and compliance on watches.

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