Date: 1982-03-09
Speaker: DE LUGO (democrat)
Chamber: H

Mr. Speaker. of all the efforts to promote economic development in the territories. the most successful was the establishment of the watch and watch movement assembly industry. This industry has developed since 1959 as the result of tariff incentives provided under general headnote 3(a) of the Tariff Schedules of the United States. These incentives accorded dutyfree treatment to articles produced in the Insular possessions of which not more than 50 percent of the total value was of foreign origin. At its peak. this industry provided more than 1.300 jobs and has contributed nearly $100 million in wages and taxes to the local economy since 1967. Because of a market shift away from its mainstay of mechanical 17jewel watches to quartz analog timepieces. however. the industry will not survive unless it can adapt to that market shift. Since 1980 more than half of the industry has closed down and employment has dropped to fewer than 300 persons. Existing tariff incentives are inadequate to justify territorial production of quartz analog watches. The mainland watchcase and bracelet Industry. partly reliant on the Insular industry. might also not survive the insular industrys demise. To prevent the death of this industry. I am today introducing legislation which. If enacted. would place the industry on permanently solid footing. The major features of this bill provide for the elimination of the current limitation on foreign material content and creates a supplementary incentive tied to assembly activity in the territories. All this can be accomplished without a single new budget outlay. The supplementary incentive would result in foregone duties up to $5 million through 1982 and thereafter be indexed to growth in the ONP. Projected annual costs are not expected to exceed $3.5 million. By encouraging new and existing insular assembly operations. this legislation would avoid indirect budget costs associated with letting the industry fold. No private sector alternatives to existing watch industry employment in the insular possessions is foreseeable. In my own district. the U.S. Virgin Islands. the watch industry could disappear as early as this year or next without these new tariff incentives. This would come at a time when the President is pursuing a program of economic development in the Caribbean region to benefit our less fortunate neighbors. The tariff incentives that I am advocating constitute a unilateral concession on direct imports of watches and watch movements. It violates no GATT commitments and conflicts with no domestic manufacturing interest. This bill has been discussed informally with the Departments of Treasry. State. and Labor. the U.S. Trade Representative and the International Trade Commission. Each of these agencies either supports or does not object to my approach. In the private sector. Timex. the American Watch Association. and the American Watchcase and Band Association have no opposition. I am providing here the text of my legislation for my colleagues review and request their support. H.R. 5758 A bill to amend the Tariff Schedules of the United States with respect to the dutiable status of watches and watch movements from insular possessions of the United States Be it enacted by the Senate and House of Representatives of the United States of America In Congress assembled. SECTION 1. The Tariff Schedules of the United States (19 U.S.C. 1202) are amended by striking out "(or more than 70 percent of the total value with respect to watches and watch movements)" in subparagraph (a)(1) of headnote 3 of the General leadnotes and Rules of Interpretation. SEC. 2. For articles entered. or withdrawn from warehouse. for consumption on or after the date of enactment. headnote 6 of schedule 7. part 2. subpart E of the Tariff Schedules of the United States is amended(a) by striking out "paragraph (b)" in paragraph (a) and inserting in lieu thereof "paragraphs (b) through (h)". and (b) by striking out "an Insular possession of the United States outside the customs territory of the United States" in paragraph (a). and inserting in lieu thereof "the Virgin Islands. Guam and American Samoa (the "insular possessions"). and (c) by striking out paragraphs (b) through (d) and Inserting in lieu thereof the following new paragraphs: "(b) Watches and watch movements produced or manufactured in a U.S. Insular possession which contain any foreign component may be admitted free of duty without regard to the value of the foreign materials they contain if they conform with the provisions of this headnote. but the total quantity of such articles entered free of duty shall not exceed the amounts established by or pursuant to paragraph (c) of this headnote. "(c) In calendar year 1983 the total quantity of such articles which may be entered free of duty shall not exceed seven million units. In subsequent calendar years. the Secretaries of Commerce and the Interior (the "Secretaries"). acting jointly. shall establish a limit on the quantity which may be entered free of duty during the calendar year. and shall consider whether such limit is in the best interest of the insular possessions and not inconsistent with domestic or international trade policy considerations. Provided. That the quantity they establish in each calendar year shall not(I) exceed ten million units. or % of apparent domestic consumption (as determined by the International Trade Commission pursuant to paragraph (d) of this headnote). whichever is greater. (II) be decreased by more than 10 percent of the quantity established for the immediately preceding calendar year. and (III) be increased to more than seven million units or by more than 20 percent of the quantity established for the immediately preceding calendar year. whichever is greater. "(d) On or before April 1 of each calendar year (beginning with the first year in which watch imports from the United States insu. lar possessions exceed 9 million units). the International Trade Commission shall determine the apparent United States consumption of watches and watch movements (including solid state timepieces) during the preceding calendar year. shall report such determination to the Secretaries and shall publish such determination in the Federal Register." "(e) In calendar year 1983. not more than 5.2 million units of the total quantity of such articles which may be entered free of duty shall be the product of the Virgin Islands. not more than 1.2 million units shall be the product of Guam. and not more than 600.000 units shall be the product of American Samoa. For calendar years 1984 and 1985 and thereafter. the Secretaries may establish new territorial shares of the total amount which may be entered free of duty. taking into account the capacity of each territory to produce and ship its assigned amounts. Provided. however. That in those years a territorys share shall not be reduced by more than 200.000 units. For calendar year 1986 and thereafter. the Secretaries may reduce a territorys share by no more than 500.000 units per calendar year. Provided. That no territorial share is established at fewer than 500.000 units. (f) The Secretaries. acting jointly. shall allocate the calendar year duty exemptions provided by paragraphs (b). (c). and (e) of this headnote on a fair and equitable basis among producers located in the insular possessions. and shall issue appropriate licenses therefore. Allocations by the Secretaries shall be final. In making the allocations. the Secretaries shall consider the potential impact of territorial production on domestic production of like articles and shall establish allocation criteria. which may include minimum assembly requirements. that will reasonably maximize the net amount of direct economic benefits to the insular possessions. (g) Production Incentive Certificates. (1) Effective January 1. 1983. the Secretaries. acting jointly. shall verify the wages paid by each producer to permanent residents of the insular possessions in the preceding calendar year. and. by March 1 of each year. shall issue to each producer a certificate for a portion of the amount so verified. determined pursuant to subparagraph (11) of this paragraph. C11) The value of each producers certifi. cate shall equal 90 percent of each producers creditable wages on the assembly of the first 300.000 units produced annually. plus a graduated declining percentage to be annually established by the Secretaries of the producers creditable wages on the assembly of additional units. up to a maximum of 750.000 units annually. Provided. That the aggregate value of all certificates does not exceed an annual certificate limit. the value of which bears the same ratio to $5.000.000 as the gross national product of the United States for the preceding calendar year. as determined by the Department of Commerce. bears to the gross national product of the United States for calendar year 1982. If such limit is exceeded. the value of each producers certificate shall be reduced pro. portionately by an amount sufficient to account for the amount by which the aggregate base amount exceeds the annual certificates limit. Provided. That each producers certificate shall not be reduced below an amount equal to 90 percent of each producers creditable wages on the assembly of up to the first 300.000 units produced annually. unless the aggregate of these reduced certificates exceeds the annual certificate limit. in which event each producers certificate shall again be reduced proportionately to account for the excess. (iii) Such certificates entitle the certificate holder to secure the refund of duties equal to the face value of the certificate on watches. watch movements (including solid state timepieces) and. with the exception of discrete cases and bracelets. parts therefore imported into the customs territory of the United States by the certificate holder. (iv) Such certificates. or portions thereof. are negotiable. (v) Such certificates shall expire one year from the date of issuance and may be applied against duties on imports of watches and watch movements the entry of which were made within two years prior to the date of issuance of the certificate. (vi) For purposes of calculating the value of each producers Production Incentive Certificates to be issued during calendar year 1983 only. the greater of either (A) a producers creditable wages for calendar year 1982. or (B) an amount equal to 70 percent of a producers creditable wages for calendar year 1981 shall be considered the creditable wages for calendar year 1982 for Purposes of subparagraph (ii) of this paragraph. "(h) The Secretaries are authorized to issue such regulations. not inconsistent with other provisions herein. as they e. termine necessary to carry out their - )ective duties under this headnote. Any dutyfree entry determined not to have been made in accordance with applicable regulations shall be subject to the applicable civil remedies and criminal sanctions. and. in addition. the Secretaries may cancel or restrict the license or certificate of any manufacturer found in willful violation of the regulations."