HQ 960502 - Country of origin of t-shirts; General Note 8 (United States-Israel Free Trade Area Agreement); 19 CFR Section 12.130 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 960323 - HQ 960620 > HQ 960502

Previous Ruling Next Ruling
HQ 960502

July 2, 1997

CLA-2 RR:TC:TE 960502 CAB

CATEGORY: CLASSIFICATION

Mr. Michel Elbaz
Israel Knitting Factory Limited
Canadian Branch
9292 Meilleur #601
Montreal, QC. Canada H2N 2B5

RE: Country of origin of t-shirts; General Note 8 (United States-Israel Free Trade Area Agreement); 19 CFR Section 12.130

Dear Mr. Elbaz:

This is in response to your inquiry of April 15, 1997, requesting a country of origin determination for certain T-shirts. There were no samples submitted for examination.

FACTS:

The merchandise at issue are t-shirts. Fabric will be knit in either Israel or some other unidentified country. This knit fabric will then be transported to Israel where it will be cut into component pieces. The component pieces will then be transported to China for sewing, full assembly, and packaging. The finished t-shirts will be exported to the United States.

ISSUE:

What is the country of origin of the subject merchandise?

LAW AND ANALYSIS:

Pursuant to Section 334 of the Uruguay Round Agreements Act (codified at 19 USC Section 3592), new rules of origin were effective for textile products entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. These rules were published in the Federal Register, 60 Fed. Reg. 46188 (September 5, 1995). Section 102.21, Customs Regulations (19 CFR Section 102.21), sets forth the general rules to determine country of origin. Thus, the country of origin of a textile product is determined by a hierarchy of rules set forth in paragraphs (c)(1) through (c)(5) of Section 102.21. In this instance, the manufacturing process for the subject t-shirt occurs in Israel, China, and possibly some other unidentified country. Section 334(b)(5) states the following:

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 CFR ?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) provides that if the country of origin determination for a particular textile product was Israel pursuant to Section 12.130, Israel will presently 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, Federal Register, Vol. 61, No. 148, dated July 31, 1996.

Accordingly, pursuant to Section 12.130(b), the standard of substantial transformation governs the country of origin determination where textile 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 article last underwent a substantial transformation. Substantial transformation occurs when an article is transformed into a new and different article of commerce by means of substantial manufacturing or processing.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR

(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) describes manufacturing or processing operations from which an article will usually be considered a product of the country when it has undergone prior to importation into the United States certain processes. Section 12.130(e)(1)(iv) states that the cutting of fabric into parts and the assembly of those parts into the completed article in a country will result in a substantial transformation in that country.

In this case, pursuant to Section 12.130, the last substantial transformation occurs in the country where the fabric is cut, Israel. See, Headquarters Ruling Letter (HQ) 555730, dated February 19, 1991, where Customs determined that t-shirts produced from gray-goods knit in Israel from yarn of Israeli or third country origin, dyed, cut, and shrunk in Israel and then exported to Egypt for assembly were products of Israel. See also, HQ 731036, dated July 18, 1989, where the country of origin was found to be Country A where fabric was cut into twelve separate pattern pieces in Country A and then transported to Country B for assembly into the finished polo shirt. Therefore, the origin is conferred in Israel.

As products of Israel, the subject t-shirts may be eligible for preferential duty treatment pursuant to General Note 8 (United States-Israel Free Trade Area Agreement), HTSUSA. However, you did not request a determination concerning the eligibility of preferential duty treatment and you also did not submit the information required to make such a determination.

General Note 8, HTSUSA, states, in pertinent part:

(b) For purposes of this note, goods imported into the customs territory of the United States are eligible for treatment as "products of Israel" only if--

(i) each article is the growth, product or manufacture of Israel or is a new or different article of commerce that has been grown, produced or manufactured in
Israel;

(ii) each article is imported directly from Israel...into the customs territory of the United States; and

(iii) 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 each article at the time it is entered.

(c) No goods may be considered to meet the requirements of subdivision (b)(i) of this note by virtue of having merely undergone--

(i) simple combining or packaging operations; * *

If you want a ruling concerning the subject goods' eligibility for preferential duty treatment, please request it in writing and provide us with the information necessary to make the determination.

HOLDING:

The country of origin of the subject t-shirts is Israel. As products of Israel, the subject t-shirts are not subject to textile quota restraints.

This ruling is issued pursuant to the provisions of Part 177 Customs Regulations (19 CFR Part 177). The holding in this ruling only applies to the specific factual situation presented and the merchandise identified in the ruling request. If the information furnished is not accurate or complete, or there is a change in the factual situation, this ruling will no longer be valid. In such an event, a new ruling request should be submitted.

Sincerely,

John Durant, Director
Tariff Classification Appeals

Previous Ruling Next Ruling