CBP Lays Out Section 301 Applicability for Multiple Watch Assembly Scenarios

The country of origin for watches is largely based upon where the watch "movement" is produced, but the origin of watch bands and cases is determined by whether the assembly is completed in the same country where the movement was made, CBP said in a June 25 ruling. Seiko Watch of America, through Ernst & Young, asked CBP to rule on how the company should declare country of origin in four scenarios and whether Section 301 duties might apply. CBP found that only in one of the scenarios would the proposed fourth list of Section 301 tariffs not apply.

The first scenario involves a movement and battery made in Japan, a case and band made in China and the full assembly in Japan. Past CBP rulings have found that simply assembling the watch band and case with the movement don't automatically result in a substantial transformation of the watch band. But CBP has also ruled that "watch straps and bands assembled to a watch in the same country where the movement was assembled were substantially transformed and became a product where the watch movement was made." A watch movement is defined as the system used for determining intervals of time.

That first scenario would result in a watch that has the country of origin for all components as Japan. "The movement and the battery of the watch are produced in Japan, while the case and the band are produced in China," the agency said. "The assembly of the components of the watch also occurs in Japan. In accordance with CBP’s long standing position, the country of origin of the watch would be Japan, the country where the movement was produced." As a result, the Section 301 tariffs would not apply, CBP said.

The next scenario involved a movement and battery made in Japan, a case and band made in China and the full assembly in China. Although the country of origin will still be Japan, based on the movement, the band and case would remain of Chinese origin. That's because the assembly occurred outside of the country where the movement was made, CBP said. "[B]ecause the Chinese origin cases and bands are not substantially transformed, the proposed 301 duties would apply to the Chinese origin case and band," it said.

In the third scenario, the Japanese movement and Chinese case and band would be assembled in Thailand. Here, again, the country of origin for the watch would be Japan, but the bands and cases would be of Chinese origin because the assembly occurred in a different country from where the movement was produced, CBP said. In the last scenario, a movement from Malaysia would be assembled with Chinese cases and bands in China. The watch would be of Malaysian origin, while the band case would be of Chinese origin, CBP said. "[S]ince the Chinese origin watch bands and watch cases are not substantially transformed in the countries where these components are assembled with the watch movements, they will remain of Chinese origin, and the proposed Section 301 duties would apply to the watch bands and watch cases in these two scenarios," CBP said.