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NY E89243

November 4, 1999

CLA-2-71:RR:NC:SP:233 E89243


TARIFF NO.: 7113.19.5000

Mr. Stuart I. Rich
Kudman, Trachten, Kessler, Tacopina & Newman, LLP The Empire State Building
350 Fifth Avenue, Suite 4400
New York, NY 10118

RE: Eligibility of diamond rings from Israel for duty-free treatment under the United States-Israel Free Trade Area Implementation Act of 1985

Dear Mr. Rich:

In your letter dated September 30, 1999, on behalf of Leo Schachter Diamonds, LLC, you requested a ruling concerning the eligibility of diamond rings from Israel for duty-free treatment under the Untied States-Israel Free Trade Area Implementation Act of 1985 (“Israel FTA”).

The finished product will be imported from Israel. Each finished product consists of two components: the finished diamond and a gold ring containing baguettes and/or other very small diamonds. This type of ring is commonly called “semi-mount bridal jewelry”. “Rough” diamonds will be imported into Israel from various countries, and then cut, faceted, and polished in Israel to create a finished diamond. The semi-mounts will be imported into Israel from Hong Kong, which is where they are manufactured. Once in Israel, the semi-mount will be polished. The finished diamond will then be set into the semi-mount as its center stone. The semi-mount containing the finished diamond is the finished product, which will be sold in the United States on a wholesale basis to retailers who will resell for the primary purpose of personal adornment. You have indicated that, for purposes of the requested opinion, we are to assume that the direct cost of processing operations in Israel is not less than thirty-five percent (35%) of the appraised value of each finished product at the time it enters into the United States.

The applicable subheading for the diamond rings will be 7113.19.5000, Harmonized Tariff Schedule of the United States (HTS), which provides for “Articles of jewelry and parts there of, of precious metal or of metal clad with precious metal: Of precious metal whether or not plated or clad with precious metal. . . Other: Other” The rate of duty will be 5.5% ad valorem. Articles classified under this provision which otherwise satisfy the requirements of the Israel FTA will not be subject to duty upon importation into the U.S.

Under the Israel FTA, eligible articles which are 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), HTS.

Articles are considered the “product 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 new name, character or use different from that possessed by the article prior to the processing. In this case, we find that the processing which will take place in Israel will result in a substantial transformation of the rough diamonds but not the semi-mounts. Accordingly, if the cost of the diamonds and the labor to make the rings is not less than 35 percent of the appraised value of the article at the time it is entered, free duty under the Israel FTA will be applicable.

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 Lawrence Mushinske at 212-637-7061.


Robert B. Swierupski

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