NY L89665 - The tariff classification and status under the United States-Israel Free Trade Agreement (USIFTA) of women’s undergarments, applicability of General Note 3(a)(v), HTS. Correction to Ruling Number L87219. - United States International Trade Commision Rulings

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NY L89665

January 18, 2006

CLA-2-61:RR:NC:TAB:354 L89665

CATEGORY: CLASSIFICATION

TARIFF NO.: 6108.22.9020, 6109.90.1065

Ms. Sandra Tovar
CST, Inc.
120 C Commerce Circle
Fayetteville, GA 30214

RE: The tariff classification and status under the United States-Israel Free Trade Agreement (USIFTA) of women’s undergarments, applicability of General Note 3(a)(v), HTS. Correction to Ruling Number L87219.

Dear Ms. Tovar:

This letter replaces Ruling Number L87219, dated November 16, 2005, written on behalf of your client, Holt Hosiery, which, although the results are the same, cited an incorrect rule of origin. A complete corrected ruling follows.

You have submitted a sample of a woman’s knit-to-shape underwear panty and a knit-to-shape underwear camisole. You state that both garments are produced of 90% nylon, 7% spandex, and 3% cotton. The following manufacturing scenarios apply to both the panty and camisole:

Manufacturing Scenario #1:

Yarns are sourced in Israel and are sent to Italy, where a tubular knit fabric is constructed for the panty, featuring a one-inch hemmed waistband, with lines of demarcation for the leg openings. A tubular knit fabric is also constructed for the camisole, featuring a ¾-inch hemmed bottom, with lines of demarcation for the arm and neck openings. The tubes are then shipped from Italy to an Israeli QIZ, where the fabric outside the demarcation lines is cut away and the leg elastic is installed for the panties. The crotch liner is attached and the crotch is sewn closed on one side to create the finished panty. The garment labels are attached and the panties are inspected, packaged, and shipped directly from Israel to the U.S. For the camisoles, the tubular fabric is cut and fabric edging is sewn to the garment to create the armholes and neck opening. The camisoles are also inspected, packaged and shipped directly from Israel to the United States. You also state that Italian knitting, boarding, dyeing, and accessories equals 45% of the value. Israeli yarn (knit in Italy), packaging materials, packing labor, and inspection equals 40% of the value, and the assembly operation in the QIZ equals 15% of the garment’s value.

Manufacturing Scenario #2:

Yarns that originate in either Italy or Taiwan are knit into tubular fabric with lines of demarcation in Italy, to create the same tubes as described above. The tubes are then sent to an Israeli QIZ where the tubes are assembled into finished garments as indicated in Scenario #1 above. You state that the costs for this scenario are the Italian knitting, boarding, dyeing, and accessories which equals 45% of the value, yarn from Italy or Taiwan will equal 30% of the value, Israeli packaging materials, packing labor, and inspection equals 10% of the value, and the assembly operation in the Israeli QIZ equals 15% of the value.

Manufacturing Scenario #3:

Yarn sourced in Israel is shipped to Italy where it is knit into tubular fabric with lines of demarcation, boarded, and dyed. The tubes are sent to Serbia or Tunisia for cutting, sewing, and packaging. The garments are shipped to Israel for final inspection. The garments are then shipped directly from Israel to the U.S. You state that the costs for scenario #3 are the Italian knitting, boarding, dyeing, accessories and packaging materials which equals 45% of the value, Israeli yarn (knit in Italy) and final inspection costs equals 35% of the value, and the assembly operation and packaging labor in Serbia or Tunisia equals 20% of the value.

The applicable tariff provision for the panties will be 6108.22.9020, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for women’s or girls’ slips, briefs, panties, nightdresses, pajamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted: briefs and panties: of man-made fibers, women’s. The general rate of duty will be 15.6% ad valorem. The applicable tariff provision for the camisoles will be 6109.90.1065, HTSUSA, which provides for T-shirts, singlets, tank tops and similar articles, knitted or crocheted: of other textile materials: of man-made fiber: women’s or girls’: tank tops and singlets: women’s. The general rate of duty will be 32% ad valorem.

Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.

Under the U.S.- Israel Free Trade Agreement (USIFTA), eligible articles which are the growth, product, or manufacture of Israel and are imported directly into the U.S. from Israel or directly from the West Bank, the Gaza Strip or a qualifying industrial zone (QIZ), qualify for duty-free treatment, provided the sum of 1) the cost or value of materials produced in Israel, including the cost or value of materials produced in the West Bank, the Gaza Strip or a QIZ plus 2) the direct costs of processing operations performed in Israel, including the direct costs of processing operations performed in the West Bank, the Gaza Strip or a QIZ is not less then 35 percent of the appraised value of the article at the time it is entered. See General Note 8, HTS.

Also, under General Note 3(a)(v), HTS, articles that are products of the West Bank, Gaza Strip or a QIZ and imported directly to the U.S. from one of those areas or Israel qualify for duty-free treatment when they satisfy certain criteria. 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. One of the criteria prescribes that the sum of the cost or value of materials produced in the QIZ and the direct costs of processing operations performed in the West Bank, Gaza Strip, a QIZ or Israel, is not less than 35% of the appraised value of such articles when imported into the U.S.

For an article to be eligible to receive duty-free treatment under the USIFTA, it must be imported directly from Israel (or the West Bank, the Gaza Strip or a QIZ) and be classified under a tariff provision for which a rate of duty of “Free” appears in the “Special” subcolumn followed by the symbol “IL.” Articles provided for in subheadings 6108.22.90 and 6109.90.10 are entitled to duty-free treatment under the USIFTA, provided that they are a “product of” Israel, meet the value-content requirement, and are “imported directly” into the U.S. Failure to meet any one of these conditions would render the product ineligible for treatment under the USIFTA.

Origin Determination – Scenarios 1 and 2

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 a qualifying industrial zone.

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 (3) If the good is knit to shape, except for goods of subheading 6117.10 provided for in paragraph (e)(2) of this section, a change to 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.

In these scenarios, the tubes knit in Italy with the lines of demarcation are classified as unfinished garments in heading 6108 for the panties and in heading 6109 for the camisoles. The garments, completed in the Israeli QIZ, remain classified in headings 6108 and 6109. Thus, no classification change occurs in the Israeli QIZ, and the tariff shift is not applicable.

Section 102.21(c)(3) applies in cases where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) and where the merchandise consists of either a good that was knit to shape or (with the exception for goods of certain specifically enumerated headings), was wholly assembled in a single country, territory, or insular possession.

Section 102.21(c)(3)(i) provides the following:

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 noted above, the garment is considered knit to shape. Accordingly, Section 102.21(c)(3)(i) is applicable to the subject merchandise. The country of origin for the garments in scenarios 1 and 2 is Italy, the single country where the garments are knit to shape.

Origin Determination – Scenario 3

As the yarns in scenario #3 are sourced in Israel, we refer to Section 102.22(a), Customs Regulations (19 CFR 102.22(a)), an interim Customs and Border Protection (CBP) regulation for textile and apparel products that are products of Israel. This provision states that the country of origin of textile products is deemed to be that foreign territory or country where the article 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. An article or material usually will not be considered to be a product of a particular foreign country or territory by virtue of merely trimming and/or joining together by sewing, looping, or other means of attaching otherwise completed knit-to-shape component parts produced in a single country, even when combined with other processes (e.g. washing, drying, mending, etc.) normally incident to the assembly process, including dyeing and packaging operations.

In scenario #3, the panties and camisoles will be products of Italy, where the tubes are knit-to-shape with lines of demarcation. After the creation of these tubes, the operations that are performed in Serbia or Tunisia, and the final inspection performed in Israel are considered simple sewing, assembly, and inspectional operations, which do not possess the requisite degree of complexity to be deemed substantial manufacturing processes for purposes of conferring country of origin status. Accordingly, as Israel is not the country of origin as pursuant to Section 102.22(a), we then apply the rules in Section 102.21 (as we used in scenarios 1 and 2) to determine the country of origin:

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 3) If the good is knit to shape, except for goods of subheading 6117.10 provided for in paragraph (e)(2) of this section, a change to 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.

In this scenario, the tubes knit in Italy with the lines of demarcation are classified as unfinished garments in heading 6108 for the panties and in heading 6109 for the camisoles. The garments, completed in Serbia or Tunisia, remain classified in headings 6108 and 6109. Thus, no classification change occurs in Serbia or Tunisia, and the tariff shift is not applicable.

Section 102.21(c)(3) applies in cases where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) and where the merchandise consists of either a good that was knit to shape or (with the exception for goods of certain specifically enumerated headings), was wholly assembled in a single country, territory, or insular possession.

Section 102.21(c)(3)(i) provides the following:

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 noted above, the garments are considered knit to shape. Accordingly, Section 102.21(c)(3)(i) is applicable to the subject merchandise. The country of origin for the garments in scenario 3 is Italy, the single country where the garments are knit to shape.

In this regard, since the country of origin of the garments for all three scenarios will be Italy, they will not qualify for preferential treatment under the USIFTA and the general rates of duty will apply.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

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 Deborah Marinucci at 646-733-3054.

Sincerely,

Robert B. Swierupski
Director,

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