NY E83126 - Classification and country of origin determination for a womans knit garment; duty-free treatment for products of the West Bank, Gaza Strip, or a Qualifying Industrial Zone; General Note 3(a)(v); 19 CFR 102.21(c)(2); T.D. 98-62 - United States International Trade Commision Rulings

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July 22, 1999

CLA?2-RR:NC:TA:359/JK E83126

CATEGORY: CLASSIFICATION

Ms. Dorothy E. Irwin
London Fog
1332 Londontown Blvd.
Eldersburg, MD 21784

RE: Classification and country of origin determination for a womans knit garment; duty-free treatment for products of the West Bank, Gaza Strip, or a Qualifying Industrial Zone; General Note 3(a)(v); 19 CFR 102.21(c)(2); T.D. 98-62

Dear Ms. Irwin:

This is in reply to your letter dated June 7, 1999. Your request concerns the classification, country of origin determination and eligibility for preferential duty treatment for style 3094, a product of a Qualifying Industrial Zone (QIZ) which will be imported into the United States from Jordan. As you requested, the submitted garment will be returned to you under separate cover.

FACTS:

Style 3094 is a womans jacket that is constructed from 55% acrylic, 45% polyester, polar fleece knit fabric. The jacket features a stand-up collar; long sleeves with elastic cuffs; a full front opening with a zipper closure; two front slant pockets with zipper closures in the waist area; and an elastic, drawstring bottom. The drawstring has a cordlock.

The manufacturing operations for the jacket are as follows:

In Israel:
- the shell fabric (of Canadian origin), pocketing, collar interlining arrives on rolls and are cut to shape

In the Irbid, Jordan QIZ (Qualifying Industrial Zone): - assembly of cut components
- attachment of front and pocket zipper assembly (includes tape, slider, pull) - cutting to length and attachment of cuff elastic - attachment of hem drawstring and cordlock - sewing in labels and neck loop

In Israel:
- finishing, including final inspection, attaching paper hang tags and hanger and insertion into polybags - packing, including putting jackets into cartons and then putting the cartons into the ocean container

We assume for purposes of this ruling that the facility that will be used in the Irbid QIZ to assemble jackets has an operating certificate identifying it as a QIZ-eligible facility.

ISSUE:

What are the classification, country of origin and status under the US-Israel Free Trade Agreement of the subject merchandise?

CLASSIFICATION:

The applicable subheading for style 3094 will be 6102.30.2010, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for womens overcoats�and similar articles, knitted, other than those of heading 6104: of manmade fibers: other: other: other. The rate of duty will be 29.1 percent ad valorem.

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.

The U.S. Trade Representative, the Governments of Jordan and Israel requested the designation of the industrial zone in Irbid, Jordan, as a QIZ. Pursuant to subsequent consultations among the three Governments, the Governments of Israel and Jordan entered into a written agreement dated November 16, 1997, relating to the establishment of the Irbid QIZ, which included the following provision, entitled Rules of Origin:

The [Governments of Israel and Jordan] agree that the origin of any textile or apparel product that is processed in the Irbid Qualifying Zone, regardless of the origin or place of processing of any of its inputs or materials prior to entry into, or subsequent withdrawal from, the zone, will be determined solely pursuant to the rules of origin for textile and apparel products set out in Section 334 of Uruguay Rounds Act, 19 U.S.C. 3592.

General Note 3(a)(v)(G), HTS, defines a qualifying industrial zone as any area that: (1) encompasses portions of the territory of Israel and Jordan or Israel and Egypt; (2) has been designated by local authorities as an enclave where merchandise may enter without payment of duty or excise taxes; and (3) has been designated by the U.S. Trade representative in a notice published in the Federal Register as a qualifying industrial zone. By notice published in the Federal register on March 13, 1998 (63 FR 12572) the Office of the U.S. Trade Representative formally designated the Israeli-Jordanian Irbid Qualifying Industrial Zone as a QIZ.

Treasury Decision 98-62 dated July 13, 1998, determined that pursuant to the agreement between the Governments of Israel and Jordan, and by mutual consent of the U.S. and Israel, Customs will exclusively apply the textile and apparel rules of origin set forth in 19 CFR 102.21 in determining the country of origin of a textile or apparel product processed in the Irbid QIZ.

Paragraph (c)(1) of 19 CFR 102.21 states that "The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced." As the subject merchandise is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable.

Paragraph (c)(2) states that "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each of the foreign materials incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section:" Paragraph (e) in pertinent part states that "The following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section":

Tariff shift and/or other requirements

A change to subheadings 6102.10 through 6102.30 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or headings 5508 through 5516 or 6001 through 6002, provided that:

(A) the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA parties, and

(B) the visible lining fabric listed in chapter rule 1 for chapter 61 satisfies the tariff change requirements provided therein.

As style 3094 will be made from Canadian knitted pile fabric of heading 6001, which is one of the excepted headings, Section 102.21(c)(2) is inapplicable.

Section 102.21(c)(3) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) of this section":

(i) If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit; or

(ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled.

As the subject merchandise is wholly assembled in Jordan, Section 102.21(c)(3) applies, and Jordan is the country of origin.

STATUS UNDER THE UNITED STATES-ISRAEL FREE TRADE AGREEMENT:

Pursuant to the authority conferred by section 9 of the U.S.-Israel Free Trade Area Implementation Act of 1985 (19 U.S.C. §2112 note), the President issued Proclamation No. 6955 dated November 13, 1996 (published in the Federal Register on November 18, 1996 (61 Fed. Reg. 58761)), which modified the Harmonized Tariff Schedule of the United States (HTSUS) (by creating a new General Note 3(a)(v)) to provide duty-free treatment to articles which are the product of the West Bank, Gaza Strip or a qualifying industrial zone, provided certain requirements are met. Such treatment was effective for products of the West Bank, Gaza Strip or a qualifying industrial zone entered or withdrawn from warehouse for consumption on or after November 21, 1996.

Under General Note 3(a)(v), HTSUS, articles the products of the West Bank, Gaza Strip or a qualifying industrial zone which are imported directly to the U.S. from the West Bank, Gaza Strip, a qualifying industrial zone or Israel qualify for duty-free treatment, provided the sum of (1) the cost or value of materials produced in the West Bank, Gaza Strip, a qualifying industrial zone or Israel, plus (2) the direct costs of processing operations performed in the West Bank, Gaza Strip, a qualifying industrial zone or Israel, is not less than 35% of the appraised value of such articles when imported into the U.S. An article is considered to be a product of the West Bank, Gaza Strip or a qualifying industrial zone if it is either wholly the growth, product or manufacture of one of those areas or a new and different article of commerce that has been grown, produced or manufactured in one of those areas. As discussed earlier, under the applicable rules of origin for textiles, style 3094 would be considered a product of the West Bank or Gaza Strip, specifically Jordan.

With respect to the requirement that the articles be imported directly, General Note 3(a) (v)(B) (1) provides that:

Articles are imported directly for purposes of this paragraph if--

(1) they are shipped directly from West, the Gaza Strip, a qualifying industrial zone or Israel into the United States with out passing through the territory of any intermediate country;

Based upon the facts presented, it appears that the garment in both scenarios will satisfy this requirement

In regard to 35% value content requirement, Customs would apply the double substantial transformation test to determine whether the cost or value of materials imported into the West Bank or Gaza Strip may be counted toward the 35% requirement. Accordingly, if foreign fabric is brought into the West Bank or Gaza Strip where it is cut into components which are sewn together to make the garments, a double substantial transformation would result. Therefore, the value of the fabric may be counted towards satisfying the 35% value content requirement.

However, again, we are unable to state definitively that the garments will or will not satisfy the 35% value content requirement. Whether the requirement is satisfied can only be ascertained when the "appraised value" of the garments is determined at the time of entry into the United States.

HOLDING:

Based on the information provided, the jacket will be considered a product of the West Bank or Gaza Strip, and will be eligible for preferential duty treatment under General Note 3(a)(v), HTSUS, assuming that they are imported directly from the West Bank, Gaza Strip, or Israel, and the 35 percent value content requirement is satisfied. Again, whether the 35% value content requirement will be met must await actual entry of the merchandise.

The country of origin of style 3094 is Jordan. Based upon international textile trade agreements products of Jordan currently are not subject to quota and the requirement of a visa.

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 CFR 177.9(b)(1). This section 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 CFR 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 CFR 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 Michael Crowley at 212-637-7077.

Sincerely,

Robert B. Swierupski
Director,

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