In a crucial intervention for WatchProSite members, patrick_y clarifies common misconceptions surrounding the impending USA Tariff 2025 on Swiss watches. His introductory course meticulously breaks down the complex tariff structure, highlighting how duties are assessed not as a blanket percentage but on individual watch components. This essential primer provides a foundational understanding for collectors navigating the evolving landscape of luxury watch imports.
Many of our members have formulated some incorrect assumptions about tariffs. This short article is designed to help clear up some of the misconceptions and incorrect assumptions.
Many people assume that a 39% tariff that the USA is leveraging on all Swiss goods means that all Swiss goods are going to increase in price by around 39% if the retailer/distributors don't absorb any of the cost themselves. This is not accurate, even though news headlines seem to imply this.
Before I get into the tariff part, let me identify the key stakeholders here:
1. The manufacturer/exporter. The manufacturer is exporting the product from Switzerland to USA in our example. The manufacturer creates value by making a desirable product.
2. The importer/distributor. The distributor is importing the items into the USA and paying the tax. The distributor adds value by helping with distribution of the product in the USA market, managing advertising, training retailers on how to best represent the product, and more. The distributor marks up the item to cover its cost of goods sold, the tariff, its operational overhead, and to get a small profit. Sometimes the distributor can be a subsidiary of the manufacturer itself. The distributor buys the product at the "distributor's price" and sells the product to retailers for the "wholesale price."
3. The retailer. The retailer is buying the item from the distributor and selling it to the consumer. They are adding value by building and managing a beautiful store in a high rent and high traffic location, hiring sales clerks to represent the item and show the item and answer basic questions about the item, creating long lasting relationships with a group of customers whom will be exposed to the product, and creating localized marketing plans to build awareness in their local market. The retailer pays the distributor the "wholesale price" and charges the consumer the "retail price."
4. The consumer. The consumer has to pay for all the costs incurred up this chain. The consumer pays the retailer the "retail price."
When it comes to watches, watches entering the USA have a complex calculation method. Our Moderator Bill explained this perfectly, and I am using his words here. Do note, Bill's example is based off of whomever is importing the watch - that can be:
1. A distributor
2. A retailer: some retailers directly work with a manufacturer and don't work through a distributor, they would pay tariffs based on whatever they pay for the watch.
3. Or a consumer: a consumer could buy from a retailer at retail prices in Paris, London, or Tokyo, but will still pay Tariffs on goods based on the country of origin - Swiss watches are made in Switzerland, not the country where it was purchased, the consumer pays tariffs based on the value they received, which is presumably the retail price. Many consumers aren't aware of the existence of Watch Worksheet that breaks down the watch into individual components, and will pay a higher duty on the entire value of the watch instead.
Start of Moderator Bill's post:
I wanted to clarify how import duties on Swiss watches work in the U.S. The key point is that duties are not a simple fixed percentage of the retail price. They are assessed on the individual parts (movement, case, strap, etc.) according to the U.S. Harmonized Tariff Schedule (HTSUS), and the rates vary drastically by material and origin.Below is a concrete example for a $5,000 Swiss-made, mechanical watch with a stainless steel case and leather strap. This is an estimate based on current standard duty rates for these components.
Component Assigned Value* HTSUS Duty Rate Duty Owed
Movement (mechanical, Swiss) $3,000 $0.90 + 5.3% on the movement value (HTS 9108.11.40) ($0.90 + ($3,000 × 5.3%))=$159.90
Case (stainless steel) $1,200 4.2% on the case value (HTS 9111.20.20) $1,200 × 4.2%=$50.40
Strap (leather) $500 4.2% on the strap value (HTS 9113.90.80) $500 × 4.2%=$21.00
Estimated Total Duty: $231.30
Putting that together, for this $5,000 watch, the estimated import duty would be approximately $231.
This means the effective duty rate in this scenario is about 4.6% of the total declared value, not the 30-40% some believe. Even if special tariffs were applied, the structure is based on component values, not the final retail price.
*Important Note on "Assigned Value": The value used for customs is typically the price the importer (e.g., the brand or distributor) paid for the component or watch, not its retail price. The $5,000 retail value is used here for illustration, and the component values are estimated percentages of it for clarity. In practice, the "transaction value" is the basis for calculation.
I have not seen an example of a straight 39% on the direct value as declared by the importer i.e. wholesale so I could be incorrect in my example for future tariffs.
The last two paragraphs of Bill's posts are very important and often forgotten. The value of the watch entering the USA at the distributor's level is not the retail price, as there is still a lot of value added to the product before it's sold to the consumer at the retail price. The assigned value for a distributor-level importer is not the entire retail price of the good. As the distributor pays much less than the actual retail value of the watch. Also notice, the breakdown is of each component, each component has its own tariff code. The strap is almost never made in Switzerland and often comes from France, Eastern Europe, or Asia.
There is obviously a lot more complexity, such as advertising holdbacks, etc. But this is a very comprehensive yet quick overview of how Tariffs work in the USA in regards to importing Swiss Watches. Many thanks to Bill for providing the concrete example.
Photo Credit: American Chemical Society via AP
