CLA 2 62:RR:NC:TA:360 H83909
Steven S. Weiser, Esq.
Arthur W. Bodek, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, NY 10022
RE: Classification and country of origin determination for women’s woven garments; United States Israel Free Trade Agreement; 19 CFR Section 12.130; 19 C.F.R. Section 102.21; and General Note 8, HTS.
Dear Mssrs. Weiser & Bodek:
This is in reply to your letter dated July 30, 2001, submitted on behalf of your client, Polgat Textiles Co. Ltd., concerning the classification and country of origin determination of women’s woven garments that will be imported into the United States. The garments will be returned to you, as requested.
FACTS:
Style 8371(wool) is a pair of women’s woven pants constructed from a 96% wool and 4% spandex fabric. The straight bottom pants also feature belt loops, two front and two back pockets and a zippered front fly, the top of which is secured by a button and hook and eye closure.
Style 6633(wool) is a women’s lightweight lined shirt-jacket, the body of which is constructed from 96% wool and 4% spandex fabric. The garment features a pointed collar, long sleeves with buttoned cuffs, two buttoned chest pockets and a full front opening secured by a six-button closure.
Style 6565 is a women’s lined blazer, the body of which is constructed from a 65% polyester/32% viscose/3% spandex fabric. The tailored garment features a full front opening secured by two buttons, a collar and lapels, a breast pocket two pockets with flaps located below the waist, an interior pocket with a button closure and long hemmed sleeves.
Style 6565(wool) is identical to style 6565 except that it is constructed from 96% wool/ 4% spandex fabric.
You described the manufacturing operations for the garment as follows:
Israel
Fabric woven
Fabric will be cut into all of the necessary components
Cut components shipped to Turkey
Hong Kong (or other Asian Country)
Trim fabrics woven
Trim fabrics shipped to Turkey
Turkey
Trim fabrics cut into components
Components are fully assembled into the completed garments
Finishing operations (e.g., labeling, ironing, etc.) performed
Assembled garments shipped from Turkey back to Israel
Israel
Completed garments are inspected according to Military Standard 105-D and shipped
directly to the U.S.
ISSUES:
What are the classification and country of origin of the garments?
CLASSIFICATION:
The applicable subheading for style 8371(wool) will be 6204.61.9010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’s trousers, of wool or fine animal hair. The rate of duty will be 14.6 percent ad valorem.
The applicable subheading for style 6633(wool) will be 6206.20.3010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’s shirts, of wool or fine animal hair. The rate of duty will be 24.8 cents/kg + 18.2 percent ad valorem.
The applicable subheading for style 6565 will be 6204.33.5010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’s suit-type jackets and blazers, of synthetic fibers. The rate of duty will be 27.8 percent ad valorem.
The applicable subheading for style 6565(wool) will be 6204.31.2010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’s suit-type jackets and blazers, of wool or fine animal hair. The rate of duty will be 13.9 cents/kg + 18.6 percent ad valorem.
Style 8371(wool) falls within textile category designation 448; style 6633(wool) falls within textile category designation 440; style 6565 falls within textile category designation 635 and 6565(wool) falls within textile category designation 445.
The designated textile and apparel categories may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Part categories are the result of international bilateral agreements which are subject to frequent renegotiations and changes. To obtain the most current information available, we suggest that you check, close to the time of shipment, the Status Report on Current Import Quotas (Restraint Levels), an internal issuance of the U.S. Customs Service, which is available for inspection at your local Customs office.
COUNTRY OF ORIGIN LAW AND ANALYSIS:
On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. ?3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published Section 102.21, Customs Regulations, in the Federal Register, implementing Section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21.
EXCEPTION FOR UNITED STATES ISRAEL FREE TRADE AGREEMENT:
You have stated that the fabric is cut into garment parts in Israel. Section 334(b)(5) of the Uruguay Round Agreements Act provides that:
This section shall not affect, for purposes of the customs laws and administration of quantitative restrictions, the status of goods that, under rulings and administrative practices in effect immediately before the enactment of this Act, would have originated in, or been the growth, product or manufacture of, a country that is a party to an agreement with the United States establishing a free trade area, which entered into force before January 1, 1987. For such purposes, such rulings and administrative practices that were applied, immediately before the enactment of this Act, to determine the origin of textile and apparel products covered by such agreement shall continue to apply after the enactment of this Act, and on and after the effective date described in subsection(c), unless such rulings and practices are modified by the mutual consent of the parties to the agreement.
Israel is the only country which qualifies under the terms of Section 334(b)(5). As the Section 334 rules of origin for textiles and apparel products do not apply to Israel, we refer to the 19 C.F.R. ?12.130 rules of origin, the rules of origin applicable to textiles and textile products before the enactment of Section 334. Section 334(b)(5) makes clear that if country of origin was conferred in Israel under Section 12.130, Israel will now be accorded the same treatment. This interpretation of Section 334(b)(5) was confirmed in a Notice of a general statement of policy, Treasury Decision 96 58, appearing in the Federal Register, Vol. 61, No. 148, dated July 31, 1996.
Accordingly, applying Section 12.130(b), the standard of substantial transformation governs the country of origin determination where textiles and textile products are processed in more than one country. The country of origin of textile products is deemed to be that foreign territory or country where the articles last underwent a substantial transformation. Substantial transformation is said to occur when the article has been transformed into a new and different article of commerce by means of substantial manufacturing or processing.
Section 12.130(d) sets forth criteria for determining whether a substantial transformation of a textile product has taken place. These criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered.
Section 12.130(d)(1) states that a new and different article of commerce will usually result from a manufacturing or processing operation if there is a change in:
(i) Commercial designation or identity,
(ii) Fundamental character, or
(iii) Commercial use.
Section 12.130(d)(2) states that for determining whether the merchandise has been subjected to substantial manufacturing or processing operations, the following will be considered:
(i) The physical change in the material or article;
(ii) The time involved in the manufacturing or processing;
(iii) The complexity of the manufacturing or processing;
(iv) The level or degree of skill and/or technology required in the manufacturing or processing operations;
(v) The value added to the article or material.
Section 12.130(e)(1) states, in pertinent part, that an article will usually be a product of a particular country when it has undergone in that country:
(iv) Cutting of the fabric into parts and the assembly of these parts into the completed article; or
(v) Substantial assembly by sewing and/or tailoring of all cut pieces of apparel articles which were cut from the fabric in another country into a component garment. (e.g., the complete assembly and tailoring of all cut pieces of a suit type jacket, suit or a shirt).
Customs has consistently held that the cutting of fabric into garment parts is a substantial transformation of the fabric and that those garment parts become the product of the country in which they are cut. It is also the consistently held position of Customs that when garment parts are cut in one country but the garment in assembled in another country, unless the assembly operation is a substantial assembly such as that referred to in Section 12.130(e)(1)(v), the country or origin remains the country in which the garment parts are cut. See, for example, HRL 088235 dated March 15, 1991, and the rulings which are cited in that ruling.
Since, in this case fabric is cut into garment parts in Israel, Israel is the country of origin of the garments. This is because in Israel the fabric is substantially transformed into garment parts which are designated for a particular article of apparel, thereby creating a new and
different article of commerce. The assembly of goods on the other hand, is not enough to substantially transform the components of an article into a new and different article of commerce.
The presence of the pocketing and lining trim which is both cut and assembled in Hong Kong (or other Asian country) will not preclude treatment of the imported garments as products of Israel.
"IMPORTED DIRECTLY" FROM ISRAEL:
Under General Note 8, Harmonized Tariff Schedule of the United States (HTS), products of Israel are eligible, when imported into the United States, for the "special" duty rate set forth in the tariff schedule only if each article is imported directly from Israel into the customs territory of the United States (General Note 8(b)(ii)). The garments which are the subject of this ruling are shipped from Israel to Sri Lanka for final assembly of the component parts into the finished garments, then returned to Israel for washing, pressing and packaging prior to being exported to the U.S. To determine if the garments will be eligible for the “special” duty rate, it is necessary to determine whether their return to Israel for these processes qualifies as being “imported directly” from Israel.
Annex 3, paragraph 8, of the Israel FTA defines the words "imported directly," as follows:
Direct shipment from Israel to the U.S. without passing through the territory of any intermediate country;
If shipment is through the territory of an intermediate country, the articles in the shipment do not enter into the commerce of any intermediate country while enroute
to the U.S., and the invoices, bills of lading, and other shipping documents, show the United States as the final destination;
If shipment is through an intermediate country and the invoices and other
documentation do not show the U.S. as the final destination, then the articles in the shipment, upon arrival in the U.S., are imported directly only if they:
(i) remain under control of the customs authority in an intermediate country;
(ii) do not enter into the commerce of an intermediate country except for the purpose of a sale other than at retail, provided that the articles are imported as a result of the original commercial transaction between the importer and the producer or the latter's sales agent;
(iii) have not been subjected to operations other than loading and unloading, and other activities necessary to preserve the article in good condition.
Customs Regulations clearly contemplate that if an article is merely transshipped through a country, it is not "imported directly" from that country, but from the country from which the shipment originates. To find that the merchandise is "imported directly" from the country through which the merchandise is merely transshipped would be, at best, inconsistent with the Customs Regulations defining the term."
Accordingly, in order to be "imported directly" from Israel, the shipment upon its return from Sri Lanka must enter the commerce of Israel, i.e., it must be manipulated in Israel. As noted, above, you have advised that after assembly of the garments in Turkey, the garments will be returned to Israel for inspection according to Military Standard 105-D prior to shipment to the United States. Under these facts, we find that we find that there will be a manipulation of the merchandise and, therefore, an entry into the commerce of Israel of these garments. Therefore, the garments will be considered to have been "imported directly" from Israel into the U.S.
HOLDING:
The country of origin of the garments is Israel. Based upon international textile trade agreements products of Israel are neither subject to quota nor the requirement of a visa. The garments may be eligible for the "special" duty rate provided the sum of a) the cost or value of the materials produced in Israel, plus b) the direct costs of processing operations performed in Israel is not less than 35 percent of the appraised value of the articles at the time of entry. Whether the 35 percent test is met must await actual entry of the merchandise.
The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 C.F.R. 177.9(b)(1). This sections states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 C.F.R. 177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted in accordance with 19 C.F.R. 177.2.
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Patricia Schiazzano at 212 637 7080.
Sincerely,
Robert B. Swierupski
Director,
National Commodity
Specialist Division