The Insular Possessions Watch and Jewelry Program

In the late 1950s a watch assembly industry sprang up in the U.S. Virgin Islands in response to a tariff incentive permitting duty-free entry of U.S. insular products. By 1965 duty-free watch shipments from the Virgin Islands accounted for more than 10 percent of U.S. consumption of watches, prompting Congress to place a ceiling on insular watches at that level. Even under this restriction, the industry became an important contributor to the economic health of not only the Virgin Islands but Guam and American Samoa, as well.

Changing economic circumstances brought bad times to the industry, however, by the early 1980s. Watch industry employment plummeted. Congress, recognizing the importance of the industry to the health of the insular economies, provided in 1983 an additional incentive which had the effect of reducing insular labor costs for the producers. The industry has rebounded, although employment levels remain below the level achieved in the 1970s.

The Statutory Import Programs Staff issues to the watch producers annual allocations (the number of duty free units each producer is permitted to ship into the United States) and duty refund certificates which are based on creditable wages and the number of units shipped duty-free into the United States customs territory. The duty refund certificates were authorized by the 1983 legislation which was renewed in 1994 for an additional twelve years.

In June of 1999, Congress passed a bill authorizing benefits to manufacturers producing jewelry in the U.S. insular possessions. The law applies to jewelry manufactured in the U.S. Virgin Islands, American Samoa, Guam and the Northern Mariana Islands and imported under heading 7113 of the Harmonized Tariff Schedule of the United States. Like the watch producers, the jewelry manufacturers receive a duty refund certificate biannually which is also based on creditable wages and the number of units shipped duty-free into the United States customs territory.

The Miscellaneous Trade and Technical Corrections Act of 2004 passed in December of 2004 and extended the duty refund benefits to include the value of usual and customary health insurance, life insurance and pension benefits; raised the ceiling on the amount of jewelry that qualifies for the duty refund benefit; allowed duty refund certificate holders to secure a duty refund on any articles that are imported into the customs territory of the United States by the certificate holder duty paid; extended the insular programs until 2015; and provided compensation to insular watch producers if tariffs on watches and watch movements are reduced.


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