NY K88427 - Country of origin determination for four styles of women’s woven pants; United States Israel Free Trade Agreement; 19 CFR Section 12.130; 19 C.F.R. Section 102.21; and General Note 8, HTS. - United States International Trade Commision Rulings

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NY K88427

August 27, 2004
CLA261:RR:NC:TA:361 K88427

CATEGORY: COUNTRY OF ORIGIN

Mr. Arthur Bodek
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP Counselors at Law
245 Park Avenue – 33rd Floor
New York, NY 10167-3397

RE: Country of origin determination for four styles of women’s woven pants; United States Israel Free Trade Agreement; 19 CFR Section 12.130; 19 C.F.R. Section 102.21; and General Note 8, HTS.

Dear Mr. Bodek:

This is in reply to your letter dated August 4, 2004, concerning a country of origin determination of four styles of women’s pants, on behalf of Ann Taylor, Inc. The pants will be returned to you, as requested.

FACTS:

Style 115220 is a pair of women’s pants constructed from 54 percent polyester, 44 percent wool, two-percent spandex woven fabric. The fully lined pants have a flat waistband, a front opening with a zipper closure, a button and two hook and loop closures in the waistband that closes in the right-over left direction, two side seam pockets, two rear pockets with flaps, and hemmed leg openings.

Style 115419 is a pair of women’s pants constructed from 98 percent wool, two-percent spandex woven fabric. The fully lined pants have a flat waistband, a front opening with a zipper closure, an inside and outside button closure that closes in the right-over left direction, two rear pockets, and hemmed leg openings. Style 115547 is a pair of women’s pants constructed from 98 percent wool, two-percent spandex woven fabric. The fully lined pants have a flat waistband with belt loops, a front opening with a zipper closure, a button and hook and loop closures in the waistband that closes in the right-over left direction, two side seam pockets, and hemmed leg openings.

Style 118861 is a pair of women’s pants constructed from 96 percent wool, four-percent spandex woven fabric. The fully lined pants have a flat waistband, a front opening with a zipper closure, one inner and two outer buttons in the waistband close in the right-over left direction, one front and one rear pocket, a ¼ inch strip in the side seams, and hemmed leg openings.

The fabric for the garments will be woven in either Turkey or Italy. The lining, pocketing, interlining, piping and any other trim will be formed in Korea, Germany, the USA or another country. You described the manufacturing operations for the pants as follows:

ISRAEL
All body components are cut into components

TURKEY
Trim fabrics cut
Garments are completely assembled
All finishing operations are completed
Garments are packed for shipment to the U.S.

ISSUE:

What is the country of origin of the four pair of pants?

COUNTRY OF ORIGIN LAW AND ANALYSIS:

Section 334 of the Uruguay Round Agreements Act (codified at 19 U.S.C. 3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 C.F.R. 102.21), published September 5, 1995, in the Federal Register, implements Section 334 (60 FR 46188). Section 334 of the URAA was amended by section 405 of the Trade and Development Act of 2000, enacted on May 18, 2000, and accordingly, section 102.21 was amended (68 Fed. Reg. 8711). Thus, the country of origin of a textile or apparel product shall be determined by the sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21.

EXCEPTION FOR UNITED STATESISRAEL FREE TRADE AGREEMENT:

You have stated that the woven 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 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 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 Notice of a general statement of policy, Treasury Decision 9658, 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: Commercial designation or identity,
Fundamental character, or
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 will be considered: The physical change in the material or article; The time involved in the manufacturing or processing; The complexity of the manufacturing or processing; The level or degree of skill and/or technology required in the manufacturing or processing operations; 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 which 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 suittype jacket, suit or a 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 of origin remains the country in which the garment parts are cut. See, for example, HQ 088235 dated March 15, 1991, and the rulings that are cited in that ruling.

Since, in this case fabric is cut into garment parts in Israel, Israel is the country of origin of the pants. This is because in Israel the fabric is substantially transformed into garment parts, which are designated for a particular article of apparel, thereby creating a new and different article of commerce. The assembly of goods on the other hand, is not enough to substantially transform the components of an article into a new and different article of commerce. It should also be noted that the pocketing and trim fabric cut in Turkey do not affect the origin determination. (see HQ 557149 dated November 22, 1993)

"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 pants that are the subject of this ruling are shipped from Israel to Turkey for final assembly of the component parts into the finished pants, then exported to the U.S. directly from Turkey, the pants do not qualify for the "special" duty rate.

HOLDING:

The country of origin of the four pair of pants is Israel. Based upon international textile trade agreements products of Israel are not subject to quota nor the requirement of a visa. The pants are not eligible for the "special" duty rate because they are not imported directly from Israel.

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 C.F.R. 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 C.F.R. 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 C.F.R. 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 Angela De Gaetano at 6467333052.

Sincerely,

Robert B. Swierupski
Director,

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