You configured Endpoint: MIP Classification Apply the label automatically response rule and noticed that it is not forcing content marking changes.
16.X
25.1
Microsoft MIP SDK limitation.
The latest watermarks are not applied to Microsoft Office documents after label enforcement on the Windows endpoint. The Data Loss Prevention endpoint uses the Microsoft SDK to apply labels on Office documents. The Microsoft SDK has some limitations when adding, updating, or removing watermarks when a new label is applied to an Office document.