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HQ 562475





September 13, 2002

CLA-02 RR:CR:SM 562475 EAC

CATEGORY: CLASSIFICATION

TARIFF NO.: 6110.20.2075

Mr. William Ortiz
Executive Vice President
S.J. Stile Associates Ltd.
181 South Franklin Avenue
Valley Stream, NY 11581

RE: Eligibility of certain clothing produced in a qualifying industrial zone for duty-free treatment; General Note 3(a)(v), HTSUS; U.S.-Israel Free Trade Agreement

Dear Mr. Ortiz:

This is in response to your letter dated June 25, 2002, on behalf of Cherry Stix, in which you request a binding ruling regarding the eligibility of a prospective shipment of knit tops as products of a Qualifying Industrial Zone (QIZ) under General Note 3(a)(v), Harmonized Tariff Schedule of the United States (HTSUS). As requested, your sample will be returned (under separate cover).

FACTS:

We are informed that Cherry Stix intends to import articles of clothing into the U.S. from Jordan. Specifically, the article of clothing under consideration is a knit top, Style SBS13106. Style SBS13106 is a girl’s pullover that is comprised of 60 percent cotton and 40 percent polyester. The knit top has short, raglan sleeves and ruffled, elasticized fabric at the sleeve and neckline openings. There is also applique and embroidery work at the chest area depicting a butterfly.

You advised by telephone on July 1, 2002, that the fabric for the tops will be made in Taiwan and subsequently exported to Jordan. In Jordan, the fabric will be cut and sewn into the finished garments. The completed pullovers will then be packaged and imported into the U.S. directly from Jordan.

ISSUE:

Whether the knit tops, described above, will qualify for duty-free treatment under General Note 3(a)(v), Harmonized Tariff Schedule of the United States (HTSUS), when imported into the U.S. from Jordan.

LAW AND ANALYSIS:

Classification
By memorandum dated July 5, 2002, the Chief, Textile and Apparel Branch, National Commodity Specialist Division, advised that the applicable subheading for the girl’s knitted top, Style SBS13106, is 6110.20.2075, HTSUS, which provides for:

Sweaters, pullovers, sweatshirts, waistcoats (vests) and similar articles, knitted or crocheted (con.):

Of cotton (con.):

Other

6110.20.2075 Other: Women’s or girls’

QIZ Requirements
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 General Note 3(a) of the HTSUS to provide duty-free treatment to articles which are the product of the West Bank, Gaza Strip or a QIZ, provided certain requirements are met. Such treatment was effective for products of the West Bank, Gaza Strip or a QIZ entered or withdrawn from warehouse for consumption on or after November 21, 1996.

Under General Note 3(a)(v), HTSUS, articles the “product of” the West Bank, Gaza Strip or a QIZ which are imported directly into the U.S. from the West Bank, Gaza Strip, a QIZ 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, QIZ or Israel, plus (2) the direct costs of processing operations performed in the West bank, Gaza strip, QIZ or Israel, is not less than 35% of the appraised value of such articles when imported into the U.S. The cost or value of materials produced in the U.S. may be applied toward the 35% value-content minimum in an amount not to exceed 15% of the imported article’s appraised value. An article is considered to be a “product of” the West Bank, Gaza Strip, or a QIZ if it is either wholly the growth, product or manufacture of one of those areas or a new or different article of commerce that has been grown, produced or manufactured in one of those areas.

General Note 3(a)(v)(G), HTSUS, 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.” For purposes of this ruling, we will assume that the requirements of General Note 3(a)(v)(G), HTSUS, are satisfied and that the fabric is cut and sewn into garments in a QIZ.

“Product of” Requirement

The next issue that must be addressed is whether the knit tops are considered to be a “product of” the QIZ. To determine whether a textile or apparel article is considered to be a “product of” the West Bank, Gaza Strip or a QIZ, it is necessary to refer to the rules of origin for textile and apparel products set forth in 19 U.S.C. §3592 as implemented by section 102.21, Customs Regulations (19 C.F.R. §102.21). Pursuant to section 334 of the Uruguay Round Agreements Act, these rules of origin (published in the Federal Register on September 5, 1995 (60 F.R. 46188)) became effective for textile or apparel products entered, or withdrawn from warehouse, for consumption on or after July 1, 1996. Thus, except for the purpose of determining whether a good is a product of Israel (see 19 C.F.R. 102.21(a)), the country of origin of a textile or apparel product is determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of 19 C.F.R. §102.21.

Section 102.21(c)(1), the first of the sequential rules of origin to be applied, states: “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.” This provision is inapplicable in this case because the goods are not wholly obtained or produced in a single country, territory or insular possession.

Accordingly, the next provision to be applied is section 102.21(c)(2), which provides:

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 foreign material 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.

As stated, supra, the knitted top is properly classified in heading 6110, HTSUS. Accordingly, for goods classified in headings 6101 through 6117, HTSUS, section 102.21(e) provides in pertinent part:

(1) If the good is not knit to shape and consists of two or more component parts, a change to an assembled good of heading 6101 through 6117 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession

In the case under consideration, the knit tops are not knit to shape and consist of two or more component parts. Therefore, the remaining issue that must be determined is whether the knit tops are “wholly assembled” in the QIZ.

The term “wholly assembled” is defined in 19 C.F.R. §102.21(b)(6) as:

Wholly assembled. The term “wholly assembled” when
used with reference to a good means that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as “wholly assembled” in a single country, territory, or insular possession.

The instant case is similar to Headquarters Ruling Letter (HRL) 560906, dated May 11, 1999, in which Customs held that outerwear made of components cut and assembled in the Irbid, Jordan QIZ were “wholly assembled” in the QIZ and were considered “products of” the QIZ. Additionally, in HRL 560882, dated July 1, 1998, Customs held that where foreign fabric was imported into the West Bank or the Gaza Strip and then cut, assembled and finished into polo-style shirts, pullover shirts and pull-on pants in the west Bank or the Gaza Strip, the apparel was considered to be a “product of” the West Bank or Gaza Strip. Therefore, because the goods in the instant case consist of two or more component parts and will be wholly assembled in a qualifying QIZ, under 19 C.F.R. §102.21(e), the garments will be considered “products of” the QIZ for the purposes of duty-free treatment under General Note 3(a)(v), HTSUS.

Value Content Requirement

If an article is comprised of materials which are imported into Israel, the QIZ, West Bank or Gaza Strip, the cost or value of those materials may be included in calculating the 35% value-content requirement only if they undergo a double substantial transformation in the QIZ, Israel, West Bank or Gaza Strip. The materials must be substantially transformed in one or more of these areas into a new and different intermediate article of commerce, which is then transformed a second time during production of the final article which is exported to the U.S.

In HRL 560882, supra, Customs held that the cutting and assembly operations performed in the West Bank or Gaza Strip resulted in a double substantial transformation and, therefore, the cost or value of the foreign fabric could be counted towards satisfying the 35% value-content requirement under General Note 3(a)(v), HTSUS. Similarly, in HRL 560906, Customs held that cutting and assembling foreign fabric in the Irbid, Jordan QIZ to make outerwear resulted in a double substantial transformation. Accordingly, we conclude that, in the case under consideration, the fabric undergoes a double substantial transformation. First, the fabric of Taiwanese origin is cut into components, which are new and different intermediate articles of commerce. Then, the components are combined to create the knit tops at issue. Therefore, the cost of the fabric may be applied towards satisfying the 35 percent value-content requirement under General Note 3(a)(v), HTSUS.

HOLDING:

Based upon the information provided, the knit tops assembled in the QIZ, as described above, will be considered “products of” the QIZ. The foreign fabric, which is cut into components and assembled in the QIZ to create the finished garments, undergoes a double substantial transformation. Therefore, the fabric’s cost or value may be counted towards satisfying the 35 percent value-content requirement under General Note 3(a)(v), HTSUS. Therefore, the garments will be entitled to duty-free treatment under General Note 3(a)(v), HTSUS, assuming that they are imported directly into the U.S. from a QIZ, the West Bank, Gaza Strip, or Israel, and the 35 percent value-content requirement is satisfied. A final determination regarding whether the 35 percent value-content requirement will be met must await actual entry of the merchandise.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed
without a copy, this ruling should be brought to the attention of the customs officer handling the transaction.

Sincerely,

Myles B. Harmon

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