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NY C87902

June 16, 1998

CLA-2-62:RR:NC:3:353 C87902


TARIFF NO.: 6211.32.0081

Mr. Stephen M. Zelman

Stephen M. Zelman & Associates

888 Seventh Avenue

New York, NY 10106

RE: Welder's top and pants from Israel; U.S.-Israel Free Trade Area Agreement; 35% value-content requirement.

Dear Mr. Zelman:

In your letter dated May 18, 1998, on behalf of Sportsmed International, Inc., you requested a ruling regarding the 35% value-content requirement under the U.S. Israel Free Trade Area Agreement (FTA). A sample of the welder's top and pants were provided and are being returned as requested.

The subject merchandise consists of two items, a welder's top or garment and a welder's overall or pants. The items are made of green heavy weight woven 100% cotton fabric. The fabric has been treated with a chemical flame retardant known as "Proban". The garments are stated to be specially designed for a welder and will be marketed as garments for a welder. Because of the flame retardant treatment, the garments will not ignite when exposed to sparks generated during the welding process.

Ruling NY C80110, dated October 29, 1997, classified the welder's top under subheading 6211.32.0081. Ruling NY C86792, dated April 30, 1998, classified the welder's pants under subheading 6211.32.0081.

The manufacturing operations for the welder's top and pants are as follows: The fabric is produced and treated with the flame retardant in a third country. The fabric is imported into Israel in rolls where the fabric is cut to shape into panels, pockets and collars for the top, and panels, pockets, belt loops and waistbands for the pants. The components are then assembled by sewing and hemming.

Ruling NY C86792, dated April 30, 1998, determined that the welder's top and pants were products of Israel. You now ask whether the value of the fabric imported into Israel, which is cut to shape and assembled into the welder's top and pants, can be included in the 35% value-content requirement under the U.S. Israel Free Trade Area Agreement.

Under the Israel FTA, eligible articles the growth, product, or manufacture of Israel which are imported directly to the United States from Israel qualify for duty-free treatment, provided the sum of 1) the cost or value of materials produced in Israel, plus 2) the direct costs of processing operations performed in Israel is not less than 35 percent of the appraised value of the article at the time it is entered. See General Note 8(b), Harmonized Tariff Schedule of the United States (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. A substantial transformation occurs when an article emerges from a process with a name, character, or use different from that possessed by the article prior to processing. Sections 12.130(d) and (e), Customs Regulations (19 C.F.R. §12.130(d) and (e)), set forth criteria for determining whether a textile or textile article has been substantially transformed. 19 C.F.R. §12.130(e)(1)(iv) states that an article or material will be a product of the country where the fabric is cut into parts and those parts are assembled into the completed article. In this case, the cutting of the welder's garments components in Israel from the foreign fabric into panel components and the assembly of these components substantially transforms the fabric into "products of" Israel for purposes of the Israel FTA.

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).

In determining whether the 35% value-content requirement is satisfied, the cost or value of the cut to shape component pieces in Israel may be included in the 35% computation only if the foreign fabric imported into Israel undergoes the requisite double substantial transformation. This means that for purposes of the 35% value-content requirement, the foreign material is substantially transformed in Israel and this different product is then transformed into yet another new and different product which is exported to the United States.

Customs has held that, for purposes of the GSP, an assembly process will not work a substantial transformation unless the operation is complex and meaningful. Whether an operation is complex and meaningful depends on the nature of the operation. It is necessary to consider the time, cost, and skill involved, the number of components assembled, the number of different operations, attention to detail and quality control. It would appear that this assembly procedure does not achieve the level of complexity contemplated. However, the court has held that in situations where all the processing is accomplished in one GSP beneficiary country, the likelihood that the processing constitutes little more than a pass-through operation is greatly diminished. Consequently, if the entire processing operation performed in the single country is significant, and the intermediate and final articles are distinct articles of commerce, then the double substantial transformation requirement will be satisfied.

We must next determine whether each of the components used to produce the welder's top and pants will undergo a double substantial transformation in Israel. Applying these principles to the processing of the foreign fabric in Israel, we believe that the double substantial transformation requirement is satisfied with respect to the fabric. The cutting to shape of the imported fabric will transform it into new and different articles of commerce. We believe that the cut to shape components are considered to be intermediate articles of commerce which are ready to be put into the stream of commerce where they can be bought and sold. The assembly operation of sewing the component parts into a finished welder's top and pants is not complex enough to constitute a substantial transformation by itself. Nevertheless, the overall processing operations (i.e., cutting and sewing) performed in Israel are substantial. For this reason, and in view of the production in Israel of distinct articles of commerce in the form of a welder's top and pants, the double substantial transformation requirement is satisfied. Further, this is not the type of minimal, "pass-through" operation that should be disqualified from receiving duty-free treatment under the Israel FTA.

In addition, to be eligible for entry pursuant to the Israel FTA, the articles must be "imported directly" from Israel. Annex 3, paragraph 8, of the Israel FTA defines the words "imported directly," as follows:

(a) Direct shipment from Israel to the U.S. without
passing through the territory of any intermediate

(b) If shipment is through the territory of an
intermediate country, the articles in the shipment do not enter into the commerce of any intermediate country while en route to the U.S., and the invoices, bills of lading, and other shipping documents, show the United States as the final destination;

(c) If shipment is through an intermediate country and the invoices and other documentation do not show the U.S. as the final destination, then the articles in the shipment, upon arrival in the U.S., are imported
directly only if they:

(i) remain under control of the customs authority
in an intermediate country;

(ii) do not enter into the commerce of an
intermediate country except for the purpose of a sale other than at retail, provided that the articles are imported as a result of the original commercial transaction between the importer and the producer or the latter's sales agent;

(iii) have not been subjected to operations other
than loading and unloading, and other activities necessary to preserve the article in good condition.

The "imported directly" requirement will be satisfied for goods shipped directly from Israel to the United States. In the event that the shipment is transshipped through another foreign port before arriving in the United States, the requirements of paragraphs (b) or (c) above will be triggered and must be satisfied in order to be entered in accord with the Israel FTA.

Based on the information provided, the imported articles will be considered "products of" Israel. We are unable to state definitively whether the welder's top and pants will or will not satisfy the 35% value content requirement. A detailed breakdown of the direct costs of processing and an estimate of the appraised value of the sweatshirts at the time of entry into the United States will be necessary to determine whether this requirement is met under these circumstances. However, the value of the material used to make the welder's top and pants may be used as "materials produced in Israel" to satisfy this require-ment since it will undergo the requisite double substantial transformation.

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 C.F.R. §177.9(b)(1). This sections 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 C.F.R. §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 C.F.R. §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 Kenneth Reidlinger at 212-466-5881.


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