Statement by the President Upon Signing Bill Relating to the Importation of Watches from U.S. Insular Possessions.

I HAVE today signed into law H.R. 8436, "To amend the Tariff Schedules of the United States with respect to the dutiable status of watches, clocks, and timing apparatus from the insular possessions of the United States."

This bill, among other things, imposes specified quotas on the number of watches and watch movements containing foreign components that can be imported duty-free into mainland United States from the Virgin Islands, Guam, and American Samoa.

A provision of existing law--headnote 3(a) of the Tariff Schedules of the United States--has resulted in the situation giving rise to the present bill. Headnote 3(a) permits articles to come into the United States duty-free through the three insular possessions if they do not contain more than 50 percent dutiable foreign materials by value.

Due to the way in which the formula in headnote 3(a) works, some articles, especially those subject to high duties, come into the United States duty-free with relatively little labor or materials added by the insular possessions. Thus, the large number of watches made of foreign parts and assemblies which are entering the United States under this provision has led to enactment of the present bill.

Watches are not the only articles that have been imported in this way. A number of other articles requiring little or no processing are also involved. There is now pending before me a bill, H.R. 11216, designed in part to remove buttons altogether from duty-free treatment under headnote 3(a).

Duty-free imports from the United States insular possessions have been viewed both as spurs to the economies of these areas and as sources of unfair competition to mainland industry. Nevertheless, the situation is not as simple as either view would lead us to believe. Numerous unanswered and complicated questions dealing with both the contribution of such tariff treatment to the economy of the islands and the effects of that treatment on mainland industry must be answered.

Recognizing this, the executive branch now has well underway a study of the general problem highlighted by this bill--how can we assist the possessions while dealing fairly with mainland producers. When that is completed and its results assessed, the administration should be in a position to recommend to the Congress whatever changes in the law may be necessary.

In the meantime, I have approved H.R. 8436 as an interim measure designed to hold the watch industry in the insular possessions at approximately its present level and thereby avoid further aggravation of the problems created by watches. I want to make it clear, however, that I do not regard the bill as being definitive or as prejudicing any corrective legislation required in the long run.