Horolonomics

If I told you there is a switch that Rolex could flip and immediately hamstring the American secondary watch market would you believe me? Frankly, I wouldn't have believed this myself until I stumbled upon a disclaimer in a Sotheby's catalogue from 2008. It read: "Important Notice regarding Importation into the United States of Corum, Rolex, Piaget or Franck Muller Watches. Sotheby's cannot arrange for the delivery of Corum, Rolex, Piaget or Franck Muller watches to the United States because U.S. laws restricts the import of Corum, Rolex, Piaget or Franck Muller watches.

The buyer or a designated agent may collect the property in the country of sale." I thought this was an extremely odd restriction which, frankly, I had never heard of before.

Restrictions on international flows of goods are not, themselves, rare. Quotas on imports, as well as taxes on imports, are a vestige of an outmoded view of international trade. This idea behind mercantalism is premised upon a zero sum view of the world in which one party's gain will only emerge because someone else has lost. So, if your country imports something, the exporting country has won and your country has lost. Modern, mainstream, economic thinking has largely left mercantilism and the zero sum view of trade in the dustbin of history. Under fairly general conditions, trade is a win-win for both parties engaged in exchange.

Certainly in 2008, the benefits of free trade were widely known in the US. More open trade governed a large number of product markets as a result (mercantilism was the dominant view in the 15th - 18th centuries, it has seen something of an unfortunate resurgence in the past 8 years or so in the US). In 2008, barriers to imports for many many products were low and / or falling. For this reason, I found it hard to believe that US lawmakers specifically targeted preowned Corum, Rolex, Piaget and Franck Muller (CRPF) watches and prohibited their importation. Even if there were an anti-Swiss watch political coalition in the US in 2008 (again, extraordinarily unlikely) why would they have targeted this somewhat odd list of brands? They're all Swiss, but it is hard to know why other Swiss brands like Omega, for instance, would not have been verboten.

So I decided to do a little investigating to see if I could figure out the origin of the CRPF American import barrier. After a little digging in the archives of the watch forums (I hope we never lose these) I was on the trail of an article from the publication US Customs Today.

The article was entitled "An Untimely Christmas Delivery." The author details how, sometime prior to February, 2002, US Customs Senior Inspector Bonnie Adelman had turned her attention to a package which supposedly contained three Cartier watches and one Patek Philippe watch. When Inspector Adelman and Import Specialist Anthony Grossi opened the package, they found 15 Rolex watches. They immediately seized the watches. In all likelihood, the rogue shipment of Rolexes was sold at auction (only to a buyer who would take them out of the US) with the proceeds from the sale going to the US government.

At the very end of the US Customs article was an important part of the answer to the mystery of the CRPF trade barrier.

There was a paragraph which read "The Rolex trademark recordation with Customs indicates 'Import of Goods Bearing Genuine Trademarks or Trade Names Restricted.' This means that genuine Rolex products can only be imported with the permission of the trademark owner, Rolex Watch U.S.A. Inc. A private individual can hand carry one Rolex watch from a trip overseas without obtaining permission. Bring in more than one, and they will all be seized as a trademark violation. Purchasing a Rolex from overseas by mail is also a trademark violation." This explains why the package shipper probably intentionally mislabelled the shipment as containing Cartier and Patek watches. When I searched the US Customs recordation page, I could not find an entry indicating that importing Patek to the US ever required permission. The same was true for Cartier. If the package documentation had been taken at face value by the customs agents, the 15 Rolexes would have circumvented the trade barrier.

Like Rolex, US Customs records do indicate that "grey market" US importation of Corum watches was restricted (it is important to note that US Customs seems to use the term "grey market" to refer to any watch shipped across the border by anyone other than the trademark holder, this is noticeably different than the present use of the term "grey market" as specifically applied to the watch industry). Interestingly, I was not able to confirm that Piaget and Franck Muller prohibited "grey market" importation of their watches. However, my guess is that I'm simply not conducting the search properly.

Perhaps one of the most interesting remaining questions is: why did Rolex decide to drop its trademark-based barrier to unapproved US imports of their watches (see screengrab of current recordation)? In my book on Rolex, I provide archival documentation that the brand had a longstanding concern with the problem of "trade diversion," in which watches appeared in markets other than those Geneva initially sent them to. The trademark barrier was clearly one tool the brand relied upon for some period of time in order to prevent "unauthorized" shipments of watches into the United States. Further, authorized dealers in the US likely preferred the arrangement in which there was softer competition from pre-owned sources of watches abroad. Perhaps Rolex leadership realized that if other brands, such as Omega apparently, were not restricting imports, Rolex was at a competitive disadvantage. Collectors are certainly more likely to buy a watch in the first place if it is easy to resell.

One thing is clear, if not for the decision by Rolex to allow for much freer international trade in their watches, the vexatious shortage of certain references plaguing the modern era would have been much, much worse. From this perspective, it is only by grace of Rolex, and all the brands really, that watches are more available than strict enforcement of trademark barriers would allow. One does wonder, though, if there is an ongoing question discussed in the C-suite of certain brands: is it time to bring back the trademark barriers in the US?

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