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NY M82373




May 11, 2006

CLA-2-61:RR:NC:TA:356 M82373

CATEGORY: CLASSIFICATION

Mr. Michael Lee
Lee & Huang Associates
2330 Mountain Brook Drive
Hacienda Heights, CA 91745

RE: Classification and country of origin determination for a men’s knit garment; United States-Israel Free Trade Agreement; 19 C.F.R. Section 102.22; General Note 8, HTSUS; T.D.96-58

Dear Mr. Lee:

This is in reply to your letter dated April 7, 2006, on behalf of Four Seasons Design Inc., concerning a classification and country of origin determination for a men’s knit garment that will be imported into the United States. In your correspondence, you state that the fabric for the garment will be knit in China or Taiwan and the labels, hang tags, polybags, drawstrings, eyelets etc. will be sourced in China. After assembly, the garments will be shipped directly to the United States from China. You have provided a sample of the finished garment. As requested, your sample will be returned.

FACTS:

Style No. FSD040706 is a man’s sweatshirt constructed from 80% cotton, 20% 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; an embroidered design on the chest and sleeves; and a rib knit bottom. You state that the garment will also be imported in fabric of the same napped construction but in a 100% cotton or a 55% polyester, 45% cotton blend. The location and type of embroidered designs and graphics will vary depending upon the customer.

The manufacturing operations for the garments are as follows:

TAIWAN OR CHINA:

- The fabric is knit and exported to Israel

ISRAEL:

The component parts are cut to shape
The cut parts are sent to China

CHINA:

- The cut parts are assembled into completed garments - The embroidery or graphics are 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 Style FSD040706 in 80% cotton, 20% polyester and in 100% cotton will be 6110.20.2040, Harmonized Tariff Schedule of the United States (HTSUS), which provides for pullovers, and sweatshirts, knitted or crocheted: of cotton: other: sweatshirts: men’s or boys’. The general rate of duty is 16.5% ad valorem.

The applicable subheading for Style FSD040706 in 55% polyester, 45% cotton will be 6110.30.3040, Harmonized Tariff Schedule of the United States (HTSUS), which provides for pullovers, and sweatshirts, knitted or crocheted: of man-made fibers: other: other: other: other: sweatshirts: men’s or boys’. The general rate of duty is 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/.

Style FSD040706 in 80% cotton, 20% polyester and in 100% cotton falls within textile category designation 338. Style FSD040706 in 55% polyester, 45% cotton falls within textile category designation 638. Quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information as to whether quota and visa requirements apply to this merchandise, we suggest that you check, close to the time of shipment, the “Textile Status Report for Absolute Quotas” available at our web site at www.cbp.gov. In addition, you will find current information on textile import quotas, textile safeguard actions and related issues at the web site of the Office of Textiles and Apparel at otexa.ita.doc.gov.

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 STATES-ISRAEL FREE TRADE AGREEMENT:

Section 102.21(a) specifically states that the rules in Section 102.21 shall not apply “for purposes of determining whether goods originate in Israel or are the growth, product, or manufacture of Israel.” The basis for the Israeli exception is Section 334(b)(5) of the Uruguay Round Agreements Act, which states 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. 102.22 rules of origin, which reflect the rules of origin applicable to textiles and textile products before the enactment of Section 334. Section 334(b)(5) makes clear that if, by application of 19 C.F.R. 102.22, Israel was determined to be the country of origin of a product prior to enactment of Section 334, the same treatment will be accorded after enactment of Section 334. 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 102.22(a), 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 102.22(b) 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 102.22(b)(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 102.22(b)(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 102.22(c) states, in pertinent part, that an article will usually be a product of Israel when it has undergone in Israel: (iv) Cutting of 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 have been cut from fabric in another foreign territory or country, or insular possession of the U.S., into a completed garment. (e.g., the complete assembly and tailoring of all cut pieces of suit-type jackets, suits and shirts).

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 102.22(c)(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.

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 (HTSUS), 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 garments do not qualify for the "special" duty rate.

HOLDING:

The country of origin of the sample garment 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.

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 Mary Ryan at 646-733-3271.

Sincerely,

Robert B. Swierupski
Director,
National Commodity Specialist Division

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