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NY N004419





January 17, 2007

MAR-2-RR:NC:TAB:354

CATEGORY: MARKING

Mr. Harel Sobovitz
Delta Galil Industries Ltd.
Industrial Zone
P.O. Box 267
Carmiel, Israel

RE: THE COUNTRY OF ORIGIN MARKING OF UNDERGARMENTS; 19 C.F.R. 102.22

Dear Mr. Sobovitz:

In your letter dated October 26, 2006 you requested a ruling on whether the proposed marking “Made in Israel” is an acceptable country of origin marking for imported undergarments. This ruling will only address the country of origin marking of the apparel, and not the issue of eligibility under the United States – Israel Free Trade Agreement (USIFTA).

You have submitted a sample of a woman’s bikini panty, Victoria’s Secret brand, style #169588 “Invisible Low Rise Bikini” constructed of a finely knit 85% nylon, 15% spandex fabric. The panty features silicon elastic leg openings and a silicon elastic waistband.

You state that the tubular knit fabric used to make the undergarments will be produced (knit) in Israel and leg openings are cut to shape in Israel, creating an unfinished panty. In Jordan, the crotch portion that was created after the leg openings were cut to shape in Israel is now sewn closed on one side and other components of Israeli origin (sewing thread, labels), silicon elastic from Japan, and the Victoria’s Secret logo label from the United Kingdom are also used to assemble the articles into finished panties. The panties will also be inspected and packed in Jordan, and will then be sent back to Israel where “shipment preparation” takes place before they are imported into the U.S.

For purposes of this ruling, we assume that the processes taking place in Jordan will not involve a Qualifying Industrial Zone (QIZ).

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at 19 U.S.C. 3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse for consumption, on and after July 1, 1996.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 is 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 tubular knit fabric is cut to shape in Israel, then Israel is considered to be the country of origin. This is because, in Israel, the tubular knit fabric is substantially transformed into an unfinished panty, thereby creating a new and different article of commerce. The mere sewing and assembly of the elasticized leg openings, elasticized waistband, and attachment of the garment label that takes place in Jordan is not sufficient to substantially transform the components of the article into a new and different article of commerce. In this regard, the country of origin of the sample undergarment is Israel and it may be marked “Made in Israel.”

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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