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NY J85951




August 5, 2003

CLA-2-61:RR:NC:TA:356 J85951

CATEGORY: CLASSIFICATION

Mr. Jayson Xinyu Li
Law Offices of Elon A. Pollack
865 S. Figueroa Street, Suite 1388
Los Angeles, CA 90017

RE: Classification and country of origin determination for men’s knit garments; United States-Israel Free Trade Agreement; 19 CFR Section 12.130; General Note 8, HTS; 19 CFR 102.21 (c)(2); tariff shift.

Dear Mr. Li:

This is in reply to your letter dated July 3, 2003, on behalf of TAC International Company, concerning the classification and country of origin determination for two styles of men’s knit garments that will be imported into the United States. You have provided samples of the finished garments. As requested, your samples will be returned.

FACTS:

Style No. TAC-052803DF is a man’s sweatshirt constructed from 80 percent cotton, 20 percent polyester, finely knit fabric that is napped on the inside surface. The garment has a self-fabric hood with a drawstring; long sleeves with rib knit cuffs; a pouch pocket below the waist; embroidered or screen printed logos; and a rib knit bottom.

Style No. TAC-052803JA is a man’s sweatshirt constructed from 80 percent cotton, 20 percent polyester, finely knit fabric that is napped on the inside surface. The garment has a rib knit crew neckline; long sleeves with rib knit cuffs; embroidered or screen printed logos; and a rib knit bottom.

You state that the fabric will be knit in China or Taiwan. The labels, hang tags, polybags, drawstrings, and eyelets will be sourced in China. The cutting and assembly will be performed in either Israel and China (Scenario 1) or Russia and China (Scenario 2). After assembly, the garments will be shipped directly to the United States from China.

The manufacturing operations for the garments are as follows:

SCENARIO 1:

TAIWAN OR CHINA:

- The fabric is knit and exported to Israel

ISRAEL:

- The component parts for each style are cut to shape

CHINA:

- The cut parts are assembled into completed garments - The embroidery or screen printing is applied - The garments are finished and packed for export to the United States.

SCENARIO 2:

TAIWAN OR CHINA:

- The fabric is knit and exported to Russia

RUSSIA:

- The component parts for each style are cut to shape - The cut parts are assembled into completed garments

CHINA:
- The embroidery or screen printing is applied - The garments are finished and packed for export to the United States.

ISSUE:

What are the classification and country of origin of the garments?

CLASSIFICATION:

The applicable subheading for Styles TAC-052803DF and TAC-052803JA will be 6110.20.2040, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for pullovers, :and sweatshirts, knitted or crocheted: of cotton: other: sweatshirts: men’s or boys’. The general rate of duty will be 16.9 % ad valorem.

You also stated that the same garments will be imported in 100 percent cotton and in 100 percent polyester. As the classification may change depending upon the type of fabric used, we are unable to classify those garments without a sample in the actual fabric.

Styles TAC-052803DF and TAC-052803JA fall within textile category designation 338. 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 Textile Status Report for Absolute Quotas, which is available at our Web site at www.cbp.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.

SCENARIO 1 (ISRAEL - CHINA):

EXCEPTION FOR UNITED STATES-ISRAEL FREE TRADE AGREEMENT:

You have stated that the knit 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 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 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 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 is 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 that 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 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 therein.

In Scenario 1 (Israel-China), since the fabric is cut into component garment parts in Israel, then Israel is considered the country of origin. This is because, in Israel, the knit fabric is substantially transformed into garment parts that are designated for particular articles of apparel, thereby creating a new and different article of commerce. The mere assembly of goods, on the other hand, is not sufficient to substantially transform the components of an article into a new and different article of commerce.

"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)). Since the garments which are the subject of this ruling are shipped from Israel to China for final assembly of their component parts into the finished garments and the garments are exported to the United States from China, these styles do not qualify for the "special" duty rate.

SCENARIO 2 (RUSSIA - CHINA):

Section 102.21 (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 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":

HTSUS Tariff shift and/or other requirements

6101-6117 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.

Paragraph (b) (6) defines “wholly assembled” as:

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 submitted garment is not knit to shape and consists of two or more parts. As all of the assembly operations in Scenario 2 occur in Russia, the garment is considered “wholly assembled” in a single country, that is, Russia. As per the terms of the tariff shift requirement, country of origin in Scenario 2 is conferred in Russia.

HOLDING:

Scenario 1 (Israel - China): The country of origin of the sample garments is Israel. Based upon international textile trade agreements, products of Israel are not subject to quota or the requirement of a visa. The garments are not eligible for the "special" duty rate because they are not imported directly from Israel.

Scenario 2 (Russia - China): The country of origin of the sample garments is Russia. Based upon international textile trade agreements, products of Russia are not presently subject to visa requirements or quota restraints.

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 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 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 Mary Ryan at 646-733-3271.

Sincerely,

Robert B. Swierupski
Director,

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