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NY I85922





October 25, 2002

CLA2-RR:NC:61:N3:I85922

CATEGORY: CLASSIFICATION

Mr. Bill Julich
Delmar International, Inc.
147-55 175th Street
Jamaica, New York 11434

RE: Classification and country of origin determination for a woman’s knitted sweater; United States – Israel Free Trade Agreement; 19 CFR, Section 12.130; 19 CFR 102.21(c)(4); General Notes 8 and 18, Harmonized Tariff Schedule of the United States (HTS); Dear Mr. Julich:

This is in reply to your letter dated September 6, 2002, which you submitted on behalf of your client, Charter Ventures LLC, 135 West 36th Street, 18th Floor, New York, New York 10018, requesting a classification and country of origin determination for a woman’s knitted sweater which will be imported into the United States. We are returning your sample as requested.

FACTS: The subject merchandise consists of a woman’s knitted sweater, Style 982-7418, which consists of 100% cotton fibers. The jersey knit fabric of the sweater has nine or fewer stitches per two centimeters, measured in the direction in which the stitches were formed. The sweater features a v-shaped neckline made from rib knit fabric, long, raglan sleeves with rib knit cuffs and a rib knit bottom.

You also submitted the component panels from which the sweater is made. These consist of the following: Front Panel
-self-start bottom
-self-finished sides
-armholes contoured to shape during the knitting process -neckline contoured to shape during the knitting process

Back Panel
-same as front panel

Two Sleeve Panels
-self-start ends
-self-finished sides
-contoured to shape during the knitting process at point of joining to shoulders

Narrow Knitted Fabric for Neckband

You state that the manufacturing operations for the sweater may have four different scenarios. They are as follows:

Scenario A
In Israel
-knit front and back panels

In China
-knit sleeves

In Jordan (in a Qualifying Industrial Zone – QIZ) -knit neckband
-assemble the sweater

Scenario B
In Israel
-knit front panel

In Jordan
-knit back panel

In China
-knit sleeve panels

In Jordan (QIZ)
-knit neckband
-assemble sweater

Scenario C
In Jordan (QIZ)
-knit front panel

In China
-knit back panel

In Israel
-knit sleeves

In Jordan (QIZ)
-knit neckband
-assemble sweater

Scenario D
In China
-knit front panel

In Jordan (QIZ)
-knit back panel

In Israel
-knit sleeves

In Jordan (QIZ)
-knit neckband
-assemble sweater

For the purpose of determining the country of origin of this sweater, we note that all the component panels (the “major parts”), that is, the front and back panels as well as the two sleeve panels, are considered to be knit-to-shape component panels. Thus, the sweater is considered a knit-to-shape sweater.

ISSUE:

What are the classification and country of origin of the subject merchandise?

CLASSIFICATION:

The applicable subheading for the woman’s knitted sweater, Style 982-7418, will be 6110.20.2020, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for sweaters, pullovers --- and similar articles, knitted or crocheted: of cotton: other other: sweaters: women’s. The general rate of duty will be 17.3% ad valorem.

The sweater falls within textile category designation 345. The designated textile and apparel categories and their quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information, we suggest that you check, close to the time of shipment, the U.S. Customs Service Textile Status Report, an internal issuance of the U.S. Customs Service, which is available at the Customs Web Site at WWW.CUSTOMS.GOV. In addition, 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 and should also be verified at the time of shipment.

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.

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 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 that 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 must refer to the 19 C.F.R. Section 12.130 rules of origin, which are the rules applicable to textiles and apparel products before the enactment of Section 334. As Section 334 (b) (5) makes clear, if a 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 Policy, Treasury Decision (T.D.) 96-58, which appeared in the Federal Register, Vol.61, No.148, dated July 31, 1996.

Accordingly, applying Section 12.130 (b), we note that the standard which governs the country of origin determination where textile products are processed in more than one country is the standard of substantial transformation. That is, the country of origin of textile products is the country where the articles last underwent a substantial transformation. Substantial transformation is said to occur when an 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. 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 (a) commercial designation or identity; (b) fundamental character; or (c) 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 are considered:
the physical change in the article or material; the time involved in its manufacturing or processing; the complexity of the manufacturing or processing; the level or degree of skill and/or technology required; the value added to the article or material.

Section 12.130 (e) (1) states that an article will usually be considered to be the product of a particular country when it has undergone in that country: (3) weaving, knitting or otherwise forming fabric. Conversely, according to Section 12.130 (e) (2), an article usually will not be considered a product of a particular country by virtue of merely having undergone any of the following: (3)trimming and/or joining together by sewing, looping, linking or other means of attaching otherwise completed knit-to-shape component parts in a single country, even when accompanied by other processes (e.g., washing, drying, mending etc.) normally incidental to the assembly process.

In the case of the sweater constructed under Scenario A, the front and back panels are knit to shape in Israel, and under the provisions of Section 12.130, the country of origin of the sweater is Israel. This is because, in Israel, a substantial transformation takes place when the front and back panels (the essential parts of a sweater needed to cover the wearer’s body) are formed and designated for use as a sweater, thereby creating a new and different article of commerce.

However, under your proposed Scenarios B, C and D, the knitting to shape of the component panels of the sweater is scattered over three countries, Israel, China and Jordan. Not only do these three scenarios lack a single country where the knitting takes place, but they also do not have a single country where even the essential component panels are formed, as does exist for your Scenario A. In Israel under Scenarios B, C, and D, either only one of the essential panels, the front, is knit (Scenario B) or only the two sleeves are knit (Scenarios C and D). There occurs in Israel no change in commercial identity, no change in the fundamental character, and no change in the commercial use of the component panels that are knit in Israel. Further, Treasury Decision (T.D.) 85-38, the final document which established the rules of origin under 19 CFR 12.130, has stated that an assembly process such as linking and looping cannot, by itself, substantially transform the components panels into a new and different article of commerce.

Since neither the knitting of the component panels, considered by itself, nor the assembly of those panels, viewed by itself, establishes whether Israel is the country of origin of the sweater under C.R. Section 12.130, a different test must be applied. In Customs Memorandum 088778, dated March 25, 1991, Customs held that in manufacturing situations which are not covered by 19 CFR 12.130, a country of origin determination shall be based on the portion of the article which imparts the essential character to the garment. In the case of the woman’s sweater, neither the front, the back, nor the sleeve panels give it the essential character. All the component panels are the same and they all perform similar functions. In situations where no one component imparts the essential character, the country of origin is determined according to the component which governs the classification of the garment. The determination can be made using an analysis based on the General Rules of Interpretation (GRI), HTS, Rule 3 (c). This states that the heading occurring last in numerical order among those equally meriting consideration governs the classification. The country of origin for the component that governs classification using a GRI 3(c) analysis will also determine the country of origin for the article. For this sweater, however, all of the components are the same and we cannot use the GRI 3(c) analysis because there are no competing headings.

In situations where components are manufactured in different countries and where the assembly process does not constitute a substantial transformation for purposes of 19 CFR 12.130, so that no one component determines the classification of the article, Customs will determine the country of origin on the basis of where the article last undergoes a significant processing operation. In the case of the sweater according to Scenarios B, C, and D, it last undergoes a significant processing operation in Jordan, as this is the country in which at least one component panel is knit and where all the panels are assembled into the finished sweater. Therefore, concerning Scenarios B, C, and D, since Israel is not the country of origin according to C.R. Section 12.130, the rules for country of origin determinations that follow no longer pertain. For those three scenarios we must return to and use the sequential application of the general rules set forth in paragraphs (c) (1) through (5) of Section 102.21, C.R.

Paragraph (c) (1) 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 does not apply.

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 into 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”:

HTSUS Tariff shift and/or other requirements

If the good is knit to shape, a change to heading 6101 through 6117 from any heading outside that group, provided that the knit-to-shape components are knit in a single country.

Section 102.21(c)(b) states:
(3) Knit to Shape – the term “knit to shape” applies to any good of which 50% or more of the exterior surface area is formed by major parts that have been knitted or crocheted directly to the shape used in the good, with no consideration being given to patch pockets, appliques or the like. Minor cutting, trimming or sewing of those major parts will not affect the determination of whether a good is knit to shape.
(4)Major parts – the term “major parts” means integral components of a good but does not include collars, cuffs, waistbands, plackets, pockets, linings, paddings, trim, accessories, or similar parts.

Section 102.21 (e) states that the tariff shift must occur from a heading outside of the grouping 6101 through 6117; and that the knitting be performed in a single country. However, the tariff shift occurs within and not outside the designated headings. Further, the components of the sweater are knit in more than one country. Accordingly, as the sweater does not qualify for the tariff shift, 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.

As the subject merchandise is knit to shape, but is not knit to shape in a single country, territory or insular possession, Section 102.21 (c)(3) is inapplicable.

Section 102.21 (c)(4) states, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1), (2) or (3) of this section, the country of origin of the good is the single country, territory or insular possession in which the most important assembly or manufacturing process occurred". Thus, the country of origin of the submitted sweater under Scenarios B, C, and D is the county in which the assembly of the sweater is combined with the knitting of the front or back component panel because that country will constitute the country where the most important manufacturing or assembly process takes place.

In the case of the subject merchandise, according to Scenarios B, C, and D,
the knitting to shape of the back panel in Scenario B, the knitting to shape of the front panel in Scenario C, and the knitting to shape of the back panel in Scenario D, all of which occur in Jordan, when combined with the assembly of the sweater, which occurs in Jordan in all three scenarios, constitutes the most important assembly or manufacturing process. Accordingly, the country of origin of the sweater under Scenarios B. C, and D is Jordan.

HOLDING:

The country of origin of the woman’s knitted sweater, Style 982-7418, is Israel under Scenario A and Jordan under Scenarios B, C, and D. Based upon international textile trade agreements, products of Israel and Jordan are not subject to quota or the requirement of a visa.

Under General Note 8, HTS, products of Israel are eligible, when imported into the United States, for the “special” rate of duty set forth in the tariff schedule if the article is imported directly from Israel into the customs territory of the United States and if all other statutory requirement are met. The “special” duty rate for the sweater under consideration is Free.

General Note 18 (HTS) sets forth the requirements for preferential tariff treatment pursuant to the United States – Jordan Free Trade Area Implementation Act. Products which are wholly the growth, product or manufacture of Jordan, as defined in General Note 18(c), HTS, or are new and different articles of commerce that meet the additional requirements of General Note 18(c), HTS, are imported directly from Jordan into the customs territory of the United States and that meet all other legal requirements, are subject to a reduced rate of duty. If the sweater fulfills all of these requirements the duty will be assessed at 10.3% ad valorem.

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 Mike Crowley at 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,

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