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HQ 967352

November 8, 2005



TARIFF NO.: 6211.49.1090; 6114.30.3070

Area Director, JFK International Airport Area c/o Chief, Liquidation and Protest Branch Building 77
John F. Kennedy International Airport
Jamaica, NY 11430

RE: Eligibility of pareos under Israel Free Trade Agreement; Protest 4701-04-100066

Dear Sir or Madame:

This is in reply to your correspondence forwarding an Application for Further Review of Protest (AFR) 4701-04-100066, which was filed by the law firm of Meeks & Shepherd on behalf of their client, Gottex Models (USA) Corporation. Your office also forwarded a sample pareo to this office for our review.


On January 22, 2004, Counsel for the protestant timely filed a Protest and Application for Further Review (hereinafter "AFR") against Customs and Border Protection's (CBP) denial of United States-Israel Free Trade Agreement ("USIFTA") preference for certain women's knitted and woven garments and subsequent liquidation of twenty-two entries of various styles of merchandise between October 2003 and December 2003.

The facts leading to the Port's denial began on May 2, 2003 when CBP issued a Customs Form (CF) 28 requesting that the protestant provide a sample of each style entered under subheading 6214.90.0010, HTSUSA. Subsequent to the protestant's failure to respond to this request, CBP issued a proposed Rate Advance on August 5, 2003 against all unliquidated entries and denied USIFTA preference to certain silk printed, woven pareos, which are identified on the submitted invoices as styles 408500, 406500, 416400, 419500, 420500 and 425500.

According to counsel for the protestant, the samples at issue are style numbers 308511, 315550, 338550, 343500 and 355500. Our office requested samples of these styles and only received style 338550 and photos of the remainder.

We also requested entry documents from the Port which we did not receive and we will leave it to the Port to match the style numbers contained herein with the style numbers listed on the entry documents.

In the original submission, we received one sample pareo, identified as style 408500 that measures 52 inches and is marked "OS", which indicates one size fits all. This style garment is made from 100 percent silk printed woven fabric from Italy that was imported into Israel where it was cut on all four sides and hemmed. The merchandise was directly imported from Israel to the United States.

In a supplemental submission from counsel for the protestant, we received another sample pareo, identified as style 338550, which is manufactured in one size and contains strips of lace fabric and detailed embroidery. There is no country of origin labeling on the sample. Counsel describes style 338550 as having a "jacquard base fabric and embroidered lace components which are assembled together with the fringe being cut in Israel after assembly." We also received a photo of pareo style 333550, which is designed in a shape of a fan with a triangle portion of differing fabric in the middle.

Our response to the instant protest and AFR will be limited to the pareo merchandise, which we find are classifiable in heading 6211 or 6114, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), as other women's garments. We find that, with the exception of two styles, the pareos are not eligible for USIFTA preference.

With regard to the other merchandise that are not pareos, it is our understanding that the Port has determined that the remaining garments in the protest are eligible for USIFTA preference.

The protestant claims that AFR is warranted on the basis that the instant protest is inconsistent with prior CBP rulings, which classified same or substantially similar merchandise.


Whether the subject pareos qualify for duty-free treatment under the United States-Israel Free Trade Agreement?



We have various styles of pareos at issue and two sample pareos for review. Style number 408500 is made of woven silk fabric and is classifiable in subheading 6211.49.1090, HTSUSA, which provides for "other silk garments." Sample pareo style 338550 is made of knitted man-made fabric and is classifiable in subheading 6114.30.3070, HTSUSA, which provides for "other garments, knitted or crocheted: Of man-made fibers: Other: Other: women's or girls'."

Country of Origin

The issue in this case is whether the subject articles are eligible for the United States-Israel Free Trade Agreement (hereinafter referred to as "USIFTA"). Counsel for the protestant has indicated that as the two sample pareos are made of Italian fabric that was cut and hemmed in Israel, they are eligible for USIFTA preference.


Under the USIFTA, eligible articles which are the growth, product, or manufacture of Israel and are imported directly into the U.S. 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 each article at the time it is entered. See, General Note 8, Harmonized Tariff Schedule of the United States (HTSUS).

General Note 3(a)(iii), HTSUS, provides that special rates of duty under one or more of the special tariff treatment programs apply to those products which are classified under a provision for which a special rate is indicated in the "Special" subcolumn and for which all of the legal requirements for such programs have been met. For an article to be eligible to receive duty-free treatment under the USIFTA, it must be imported from Israel and be classified under a tariff provision for which a rate of duty of "Free" appears in the "Special" subcolumn followed by the symbol "IL." Further, articles provided for in these provisions are entitled to duty-free treatment under the USIFTA, provided that they are a "product of" Israel, meet the value-content requirement and are "imported directly" into the U.S.

"Product of" Israel

Articles are considered the "product of" Israel if they are made entirely of materials originating there or, if made from materials imported into Israel, those materials are "substantially transformed into a new and different article of commerce, having a new name, character or use, distinct from the article or material from which it was so transformed." See Annex 3 of the Agreement on the Establishment of a Free Trade Area Between the Government of the United States of America and the Government of Israel. The Agreement was approved by Congress in the United States-Israel Free Trade Area Implementation Act of 1985, Pub. L. No. 99-47, 99 Stat. 82. The basic rules of origin set forth in Annex 3 of the U.S.-Israel FTA (which are derived from section 402 of the Trade and Tariff Act of 1984) are based on section 213(a) of the Caribbean Basin Economic Recovery Act, as amended (CBERA) (19 U.S.C. 2703(a)), which contains the origin rules governing duty-free treatment under the Caribbean Basin Initiative (CBI).

However, with regard to textile and textile products, on December 8, 1994, the President signed into law the Uruguay Round Agreements Act (Pub. L. 103-465). Section 334 of the Act establishes rules of origin for textiles and textile products. In order to implement section 334, Customs published a notice of proposed rule making (60 FR 27378, dated May 23, 1995), and, after receiving comments thereon, published a final rule document, Section 102.21, Customs Regulations (now referred to as Customs and Border Protection (CBP) Regulations) (19 C.F.R. § 102.21) (60 FR 46188, dated September 5, 1995). 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:

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, [sic] 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. See 19 U.S.C. §3592(b)(5)

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 (formerly we referred to 19 USC § 12.130, but see 70 FR 58009, dated October 5, 2005, Interim Regulations, Country of Origin of Textile and Apparel Products), 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 Notice of a general statement of policy, Treasury Decision (T.D.) 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 article last underwent a substantial transformation. Section 102.22(b), CBP Regulations (19 C.F.R. § 102.22(b)), sets forth criteria for determining whether a substantial transformation of a textile product has taken place. This regulation provides that these criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 C.F.R. § 102.22(b)(2). The following are considered:

(i) The physical change in the material or article; (ii) The time involved in the manufacturing or processing operations; (iii) The complexity of the manufacturing or processing operations; (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;

In pertinent part, Section 102.22(c) describes manufacturing or processing operations from which an article will usually be considered a product of the country in which those operations occurred:

(iv) Cutting of fabric into parts and the assembly of those 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, into a completed garment (e.g., the complete assembly of all cut pieces of suit-type jackets, suits, and shirts).

The formation of pareo style 408500 is similar to the manufacture of a scarf. For example, the pareo's fabric is formed in Italy and cut and hemmed in Israel. We refer to Headquarters Ruling Letter (HQ) 085893 dated February 22, 1990 in which CBP determined that a scarf that was made in Canada from originating rayon fabric from India was not substantially transformed for purposes of conferring an origin pursuant to 19 C.F.R. § 12.130 of Canada. HQ 085893, states, in pertinent part:

We remain of the opinion that the cutting and hemming operations which take place in Canada are simple, not substantial, operations which do not significantly change the essence of the articles which is in this case the fabric.

In fact, CBP has consistently ruled that the cutting of fabric on all four sides, and hemming, does not, by itself, involve sufficient processing to constitute "substantial manufacturing or processing operations." See HQ 957566, dated March 20, 1995, citing HQ 956030, dated November 22, 1994. We note, HQ 957566, adds, in pertinent part:

There must be processing in addition to cutting and hemming. Adding piping to that processing will not suffice. Piping takes little expense and practically no time. It is done for minor decorating purposes that have no relation to the utility or manner of use of the sheet.

See also HQ 733250, dated August 10, 1990, citing to HQ 083544, dated February 28, 1990, which determined that mere cutting to length and width operations to form a kitchen towel does not meet the substantial transformation requirements outlined in 19 C.F.R. § 12.130 (now contained in 19 C.F.R. § 102.22).

In the instant case, we find the same analysis applies to the formation of pareo style number 408500 in which the fabric is merely cut to length and width and hemmed in Israel. As the cutting to length and hemming of style 408500 does not involve any complex processing operations, we do not find this to constitute substantial transformation. The country of origin of the pareo is Italy.

In the case of pareo style numbers 338550 and 333550, both manufacturing operations require more complex involvement than in the case of style number 408500. With 338550, lace fabric components are assembled with knit man-made fabric components that have been embroidered with intricate floral designs. In the case of pareo 333550, there are two different fabrics that are cut and sewn together to form the pareo. In both cases, additional detail beyond simple cutting is involved. In fact, the addition of substantial fringes and uses of additional fabric "creates[s] a visual impact" and requires substantial processing operations by enhancing the essence of the articles beyond simple cut and hemmed pareo garments. See HQ 957565, dated March 20, 1995; see also HQ 952225, dated December 8, 1992, in which CBP stated, in pertinent part:
the flat sheets have ruffles and piping sewn to their top edges and this adornment requires an extra manufacturing step that is commensurate in degree of skill and amount of time to that required in the manufacture of fitted sheets and pillow cases. (Note, that while the affixation of the ruffles and piping to the flat sheets qualifies as a substantial manufacturing process, the resulting adornment is not elaborate enough so that the flat sheet imparts the essential character to the bedding set.)

Therefore, we find the manufacturing operations in Israel involved in the formation of both styles 338550 and 333550 constitute substantial transformation pursuant to 19 C.F.R. § 102.22. The country of origin for both styles is Israel.


The protest is allowed in part and denied in part. Pareo style number 408500 is classifiable in subheading 6211.49.1090, HTSUSA, which provides for "other garments, women' s or girls': of other textile materials: containing 70 percent or more by weight of silk or silk waste, other." Sample pareo style 338550 is made of knitted man-made fabric and is classifiable in subheading 6114.30.3070, HTSUSA, which provides for "other garments, knitted or crocheted: Of man-made fibers: Other: Other: women's or girls'."

In the case of the other styles in which samples were not provided, the pareos are classified as other garments in the appropropiate subheadings of 6114 or 6211 based on their fiber content.

Style numbers 338550 and 333550 are considered to be "products of" Israel and are entitled to duty-free treatment under the USIFTA upon importation into the United States. With the exception of style numbers 338550 and 333550, the remaining pareo styles are not considered products of Israel and will not be entitled to duty-free treatment under the USIFTA upon importation into the United States. The country of origin of the pareos is Italy.

With regard to the remaining non-pareo garments, the Port has determined that those garments are considered to be "products of" Israel and entitled USIFTA preference.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.


Myles B. Harmon, Director
Commercial and Trade Facilitation Division

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