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HQ 555730

February 19, 1991

CLA-2 CO:R:C:S 555730 KCC


Mr. Sheldon Stone
ETA Import & Export Ltd.
248-06 Rockaway Blvd.
Suite 208
Jamaica, New York 11422

RE: Girls' t-shirts.U.S.-Israel Free Trade Area Agreement; substantial transformation; 35% value-content requirement; 731036; 086229; 555489; 555379; marking; quota

Dear Mr. Stone:

This is in response to your letter dated August 16, 1990, on behalf of Texinique, Inc., requesting a ruling concerning the eligibility for duty-free treatment under General Note 3(c)(vi) (United States-Israel Free Trade Area Agreement), Harmonized Tariff Schedule of the United States (HTSUS), of girls' t-shirts from Israel. Samples of the t-shirts in pattern pieces and as a finished product were submitted for examination.


Texinique will import into the U.S. girls' t-shirts from Israel. The t-shirts will be manufactured from gray-goods knit in Israel from yarn of Israeli or third country origin or gray- goods purchased from a third country. The gray-goods will be dyed, cut to size and shape, and subjected to a shrinkage process in Israel. The pattern pieces will then be sent to Egypt for sewing operations, such as joining the front and back panels at the shoulders, closing and setting sleeves, side sleeves, collar, tape and label, hemming the sleeves and bottom, and setting the pocket. The assembled t-shirts will be returned to Israel where they will be inspected and packaged for shipment to the U.S.

You state that the cost for manufacturing a dozen t-shirts from gray-goods knit in Israel is:

Israel A:
Yarn (local or imported) $6.00 knitting $1.50 dyeing and finishing $5.50 cutting $2.40

Egypt: assembly $2.00 quality control and packaging $0.60

Israel B:
Inspection and packaging $0.60

Total Manufacturing Cost: $18.30


I. Whether the t-shirts will be entitled to duty-free treatment under General Note 3(c)(vi), HTSUS, when imported into the U.S.

II. What is the country of origin of the t-shirts for country of origin and quota purposes.


I. General Note 3(c)(vi), HTSUS, eligibility

Under General Note 3(c)(vi), HTSUS (copy enclosed), eligible articles imported into the U.S. from Israel may enter free of duty or at a reduced duty rate if each article:

1. is wholly the growth, product or manufacture of Israel or is a new or different article of commerce that has been grown, produced or manufactured in Israel;

2. each article is imported directly from Israel into the customs territory of the U.S.; and

3. the sum of the cost or value of the materials produced in Israel, plus the direct cost of processing operations performed in Israel, is not less than 35 percent of the appraised value of each article at the time it is entered.

Based upon your description, the 100% combed cotton girls' t-shirts appear to be classified under subheading 6109.10.0045, HTSUS, which provides for t-shirts, singlets, tank tops and similar garments, knitted or crocheted: of cotton: women's or girls': other: t-shirts: girls', which is a duty-free eligible provision under General Note 3(c)(vi), HTSUS.

Articles are considered "products of" Israel if they are made entirely of materials originating there or, if made from materials imported into Israel, they are substantially transformed into a new or different article of commerce. In addition, "products of" Israel which are further processed in another country prior to their shipment to the U.S. will lose their Israeli "product of" status if the further processing in the third country results in a substantial transformation of the goods.

If an article is produced or assembled from materials which are imported into Israel, the cost or value of those materials may be counted toward the 35% value-content minimum as "materials produced in Israel" only if they are subjected to a double substantial transformation in Israel. This is consistent with Customs and the courts' interpretation of "materials produced" under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466) and the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. 2701-2706). See, Torrington Co., v. United States, 8 CIT 150, 596 F. Supp. 1083 (CIT 1984), affirmed, 3 CAFC 158, 764 F.2d 1563 (Fed. Cir. 1985).

A substantial transformation occurs when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. See, Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

Sections 12.130(d) and (e), Customs Regulations (19 CFR 12.130(d) and (e)), set forth criteria for determining whether a textile or textile article has been substantially transformed. 19 CFR 12.130(e)(1)(iii) states that an article or material usually will be a product of the country where it is subjected to weaving, knitting or other fabric forming operation. Moreover, 19 CFR 12.130(e)(1)(v) lists "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 into a completed garment..." as an example of a manufacturing or processing operation that may result in a substantial transformation. However, the regulations do not contemplate that all sewing operations will constitute a substantial transformation. The examples given in 19 CFR 12.130(e)(1)(v) involve the substantial and complete assembly and/or tailoring of all cut pieces of suit-type jackets, suits, and shirts.

We have previously held that cutting of fabric into pattern pieces constitutes a substantial transformation of the fabric, resulting in the apparel pieces becoming a product of the country where the fabric is cut. However, a substantial transformation does not occur when those pattern pieces are shipped to another country where they are sewn together into gloves and polo style shirts. See, Headquarters Ruling Letter (HRL) 731036 dated July 18, 1989 (the country of origin was found to be country A where fabric was cut into 12 separate pattern pieces in country A and then the pieces were shipped to country B for sewing together to form a polo shirt); HRL 086229 dated April 11, 1990 (fabric for industrial work gloves, which is cut in country A and sewn together in country B, has been substantially transformed in country A); and HRL 555489 dated May 14, 1990 (sewing together previously cut glove pattern pieces in country B did not result in a substantial transformation of the cut glove pattern pieces into a product of country B).

T-shirt components created in Israel from gray-goods knit in that country from yarn of Israeli or third country origin clearly constitute "products of" Israel. See, 19 CFR 12.130(e)(1)(iii). Moreover, based on our previous rulings, the cutting in Israel of fabric from third countries into pattern pieces substantially transforms the fabric into a "product of" Israel.

We further believe that the sewing operation performed in Egypt does not substantially transform the t-shirts into "products of" Egypt. The sewing operation performed in Egypt is a simply assembly of seven cut pattern pieces into a t-shirt. The sewing operation does not involve the complex sewing operation required when manufacturing a suit, suit jacket, or tailored shirt contemplated by 19 CFR 12.130(e)(v). It is a simple operation which involves the steady feeding of the cut t- shirt material into the sewing machine.

Regarding the 35% value-content requirement, the cost or value of the Israeli origin yarn may be included in the 35% computation because it is material which is "wholly the growth, product or manufacture" of Israel. Additionally, the cost or value of the yarn imported into Israel may be counted toward the 35% value-content requirement since it is subjected to the required double substantial transformation--knitting into fabric and cutting the fabric into pattern pieces. However, the cost or value of the gray-goods imported into Israel may not be included in the 35% value-content requirement. In this situation, the gray-goods have only been subjected to one substantial transformation--cutting into pattern pieces.

Based on the cost information you have provided, there appears to be no question that those t-shirts produced from gray- goods knit in Israel would satisfy the 35% requirement. However, we are unable to state definitively that the t-shirts produced from gray-goods of third country origin would satisfy this requirement. A detailed breakdown of the "direct costs of processing" and an estimate of the "appraised value" of the t- shirts at the time of entry into the U.S. are necessary to determine whether the 35% requirement is met under these circumstances. We are enclosing a copy of HRL 555379 dated May 6, 1989, which discusses in some detail those costs which are and are not considered direct processing costs under the CBERA. The CBERA's value-content requirements are nearly identical to those in General Note 3(c)(vi), HTSUS.

II. Country of Origin and Quota/Visa Requirements

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), Customs Regulations (19 CFR 134.41(b)), provides that the marking of an imported product must be conspicuous enough so that the ultimate purchaser will be able to find the marking easily and read it without strain.

Because the articles in question are textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), 19 CFR 12.130 is applicable. Section 12.130 provides that the country of origin of a textile product is that foreign territory, country or insular possession where the article last underwent a substantial transformation. As discussed previously, the country where the last substantial transformation occurred is Israel, and, therefore, Israel is the country of origin for marking purposes.

After examination of the submitted sample t-shirt, we are of the opinion that the textile label sewn into the back neck portion of the t-shirt printed with "Made in Israel" satisfies the requirements of 19 U.S.C. 1304 and 19 CFR Part 134.

The imported girls' t-shirts, manufactured in the manner described above, will be subject to applicable quota requirements as products of Israel. Based upon their classification under subheading 6109.10.0045, HTSUS, the girls' t-shirts will be subject to category 339 for quota requirements.


The girls' t-shirts which are manufactured from yarn of Israeli or third country origin will be eligible for duty-free treatment under General Note 3(c)(vi), HTSUS, assuming that they are imported directly to the U.S. Although the t-shirts made from gray-goods imported into Israel are considered "products of" Israel, we are unable to definitively state that they will satisfy the 35% value-content requirement without more detailed cost information.

The country of origin of the t-shirts is Israel for country of origin marking purposes, and the textile label sewn into the back neck portion of the t-shirt printed with "Made in Israel" satisfies the marking requirements. Girls' t-shirts are subject to category 339 quota requirements.


John Durant, Director
Commercial Rulings Division

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