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NY L80424

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November 22, 2004

CLA2-61:RR:NC:WA 361 L80424

CATEGORY: CLASSIFICATION

Ms. Hannah Chan, Assistant General Manager Business Faith International Limited
A8 & A 13 7/F, Blk A, Hong Kong Ind. Centre No. 489-491 Castle Peak Road
Kowloon, Hong Kong

RE: Classification and country of origin determination for women’s knit pants; 19 CFR 102.21(c)(4); Commonwealth of the Northern Mariana Islands; General Note 3(a)(iv), HTSUSA; Duty-Free treatment for products of the West Bank, Gaza Strip, or a Qualifying Industrial Zone; General Note 3(a)(v).

Dear Ms. Chan:

This is in reply to your letter dated October 23, 2004, requesting a classification and country of origin determination for women’s knit pants that will be imported into the United States. The submitted sample, and partially assembled components will be returned, as requested.

FACTS:

The submitted pants, style xxxJGSH722, will be constructed from either 100 percent cotton or 100 percent polyester knit fabric. The pants have a wide elasticized rib knit waistband with a drawstring; a woven fabric strip covering the side seams and pocket edges, and hemmed leg openings. You have indicated that the garment may be made in using other fibers, but since you have not provided the percentage weight of the fibers to be used, we cannot comment on the classification. The garment is constructed from the following parts – two front leg panels, two back leg panels, one waistband, waistband elastic, two pockets, a drawstring, woven fabric for trim. You have indicated that the garments will be manufactured either in China and the Commonwealth of the Northern Mariana Islands or in China and the Irbid-Al-Hassan Industrial Estate Qualifying Industrial Zone (QIZ) in Jordan.

The manufacturing operations are as follows:

CHINA
Cut the fabric to component parts
Sew eyelets to the inside center of the waistband Make waistband
Make drawstring and insert into waistband Embroider
Sew woven fabric onto pocket openings with eyelets Sew pockets onto front panels
Join out seams of front and back panels
Sew woven fabric onto out seams

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS or Jordan, QIZ Sew back and front rises
Sew inseams
Attach waistband
Sew in labels
Hem leg openings
Trimming, Inspection, and packing

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 of style xxxJGSH722, if in chief weight of cotton, [that is, made from 100 percent cotton] will be 6104.62.2011, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’strousersknitted or crocheted: Of cotton. The general rate of duty is 14.9% ad valorem.

The applicable subheading of style xxxJGSH722, if in chief weight of synthetic fibers, [that is, made from 100 percent polyester] will be 6104.63.2011, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’strousersknitted or crocheted: Of synthetic fibers. The general rate of duty is 28.2% ad valorem.

Style xxxJGSH722, in chief weight of cotton, falls within textile category designation 348; style xxxJGSH722, in chief weight of synthetic fibers, falls within textile category designation 648. 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.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:

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.

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 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. If the good is not knit to shape and does not consist of two or more component parts, a change to heading 6101 through 6117 from any heading outside that group, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408, 5512 through 5516, 5806, 5809 through 5811, 5903, 5906 through 5907, and 6001 through 6002, and subheading 6307.90, and provided that the change is the result of a fabric-making process. 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, territory, or insular possession.

The pants are classified in the above range; are not knit to shape; and consist of two or more components. Since the garment is assembled in more than one country, territory or insular possession, the terms of the tariff shift are not met and (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 neither knit to shape nor wholly assembled 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".

The most important assembly operations in the manufacture of the pants occur where the front and back rises are sewn, the inseams are sewn, and the waistband is attached. Accordingly, the country of origin is either the Commonwealth of the Northern Mariana Islands, or Jordan, QIZ, the country, territory, or insular possession in which these operations occur.

STATUS AS A PRODUCT OF THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS.

General Note 3 (a) (iv), HTSUSA, permits products of insular possessions of the United States (of which the Commonwealth of the Northern Mariana Islands is one) to be imported into the United States free of duty obligations if certain requirements are fulfilled. Duty free status is granted to those goods which Are the growth or product of the possession; or Are manufactured or produced in any such possession from materials which are the growth, product or manufacture of any such possession or of the customs territory of the United States, or of both; and Do not contain foreign materials which represent more than 50 percent of the goods’ total value (for textile and apparel articles subject to textile agreements); and Are shipped directly to the customs territory of the United States from the insular possession.

Since the Commonwealth of the Northern Mariana Islands is an insular possession of the United States, and since the good which is produced in the Commonwealth of the Northern Mariana Islands is a textile article that is subject to textile agreements, the “foreign materials” which make up the pants must not represent more than 50 percent of the article’s appraised value.

In order to meet the requirements of General Note 3(a)(iv), HTSUSA, we must determine whether the component panels which are imported into the Commonwealth of the Northern Mariana Islands from China are substantially transformed by processing in the Commonwealth and therefore become a product of that insular possession. A substantial transformation occurs when an item emerges from a process with a new name, character or use that is different from that possessed by the item prior to processing.

In determining whether the cost or the value of the Chinese component panels should be considered part of the cost of the “foreign materials” or of the cost of materials produced in the Commonwealth of the Northern Mariana Islands for the purpose of applying the 50 percent foreign value limitation under General Note 3(a)(iv), we must consider whether the component panels undergo a double substantial transformation during processing in the insular possession. Treasury Decision (T.D.) 88-17, effective April 13, 1988, determined that the concept of the double substantial transformation should be used in deciding whether foreign material that does not originate in the insular possession may nevertheless qualify as part of the value of material produced in the insular possession. To do this the foreign material must be substantially transformed in the insular possession into a new and different product and then that product must be transformed yet again into another new and different product, which is exported directly to the United States. If this happens to the foreign material, then its cost can be considered part of the value of materials produced in the insular possession.

For an example of the double substantial transformation principle as it was applied to textile wearing apparel we look to Headquarters Ruling Letter (HRL) 556214, dated March 20, 1992, in which Customs ruled that foreign rolled fabric that was imported into the Commonwealth of the Northern Mariana Islands where it was cut to shape and then assembled into golf shirts and pullovers did undergo a double substantial transformation. In contrast, the present question involves component panels that are cut in China, not in the Commonwealth of the Northern Mariana Islands. Therefore, the component panels do not undergo a double substantial transformation in the insular possession and their cost may not be included as part of the value of materials produced in the Northern Mariana Islands.

Despite the fact that the Chinese cut component panels of the pants are considered foreign materials when they are shipped to the Commonwealth of the Northern Mariana Islands, and regardless of the determination that these panels do not undergo a double substantial transformation when they are processed in the insular possession, the pants may still qualify for duty free tariff status as long as they do not contain foreign materials which represent more than 50% of the total value of the goods and it is shipped directly to the United States from the insular possession. Section 7.3 (d) of the Customs Regulations (C.R.) states that such a determination must be based on a cost comparison between: the manufacturer’s actual materials cost plus the cost of transporting those materials to the insular possession (excluding duties, taxes and charges after landing) versus the final appraised value of the imported goods under Section 402a, Tariff Act of 1930, as amended.

We note that a final determination regarding whether the foreign value limitation is satisfied for the instant merchandise can only be made at the time of entry of the goods into the United States.

STATUS UNDER THE UNITED STATES-ISRAEL FREE TRADE AGREEMENT

You have indicated that if made in Jordan, the garment will be made in the QIZ in Irbid, Jordan. 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 C.F.R. §102.21 in determining the country of origin of a textile or apparel product processed in the Irbid QIZ.

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.

Based upon the above production information, the garments meet the country of origin requirements in the West Bank, Gaza Strip or a qualifying industrial zone, specifically, in Jordan, under the applicable rules of origin for textiles, it would be considered a product of the West Bank, Gaza Strip or a qualifying industrial zone, 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 Bank, 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 garments will satisfy this requirement.

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:

The country of origin of the pants is either the Commonwealth of the Northern Mariana Islands or Jordan.

If the country of origin is the Commonwealth of the Northern Mariana Islands, component panels cut in China are considered foreign materials for the purpose of calculating the 50 percent foreign value limitation under General Note 3(a)(iv), HTSUSA. However, the pants may still be entitled to duty free status under General Note 3(a)(iv), HTSUSA, provided that they are imported directly from the Commonwealth of the Northern Mariana Islands to the United States, and that the 50 percent foreign value limitation is satisfied at the time of entry. Since the Commonwealth of the Northern Mariana Islands is not a foreign country and, therefore, the United States has no bilateral quota or visa agreement with it, the pants are neither subject to quota restraints nor to the requirement of a visa.

If the country of origin is Jordan, the garment will be considered a product of the West Bank or Gaza Strip or qualifying industrial zone, 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 the pants 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 Angela De Gaetano at 646-733-3052.

Sincerely,

Robert B. Swierupski
Director,

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See also:

• Tariff No.: 6104.62.20 - Women's or girls' trousers, breeches and shorts, knitted or crocheted, of cotton
• Tariff No.: 6104.63.20 - Women's or girls' trousers, breeches and shorts, knitted or crocheted, of synthetic fibers, nesoi
• Tariff No.: 6209.20.50 - Babies' garments & clothing acc. nesoi, of cotton, incl. sunsuits & sim app, sets & parts of sets, & diapers, not knitted or crocheted