Gail Strickler
Assistant United States Trade Representative

Section 7 of the U.S. – Israel Free
Trade Area Implementation Act
Presidential Proclamation 6955
Protocols between Egypt and Israel
Increase employment opportunities in Egypt
Stimulate participating economies
Promote collaboration between
Egypt and Israel


The article is a “new and different article of commerce” produced in QIZ

It is “imported directly” into the United States

The sum of the cost or value and the direct cost of processing in Egyptian QIZ and Israel is not less than 35%of the article’s US entered value

Up to 15% of the article’s value may be U.S inputs that contribute to the total 35% requirement.


The Egyptian manufacturer in the QIZ must contribute one third (11.7%) of the 35% content requirement

The Israeli components must contribute 10.5%

The remainder of the 35% can come from West
Bank, Gaza Strip, Israel, the QIZ, or as mentioned, the U.S.

QIZ joint committees, comprised of representatives from Egypt and
Israel. Provide lists of QIZ companies whose products are eligible for QIZ treatment
Current lists can be viewed at: http://www.qizegypt.gov.eg/images/attachment.ashx.pdf
Accurate factory directories can be significant marketing tools…

 View by Categories
 View by Country
 Search by Name

By Company or Factory Name

 Can the customer filter the information?
 Is there a good search function?
 Did I find what I am looking for?
 Is the information reliable and up to date?
How can I make my product more accessible to my customers? ….

Reliability
Quality
Price
What else do you have to do to grow business with US importers?...

Environment
Labor
Customs
… common interests

A leading labor rights activist accused Wal-Mart, Kmart and J.C.
Penney of subcontracting to a
Nicaraguan "sweatshop" despite efforts to end exploitation of workers.
… “there are cases of labor exploitation and unfair treatment everywhere" the head of Dignity
Returns,
Boosaba
Meechai.
…Pangrim Neotex, a Korean textile company,
[was] caught discharging around 1,000cu.m of untreated waste water into the Hong (Red)
River in Viet Tri City on Sunday, according to
Phu Tho Province's Environment Police Bureau head
A Call to Arms: How
We Must Take the Fight to Nike …NOW is the time for Nike's Indonesian workers to hit
Nike hard. Remember, Nike said that they would never pay out severance to workers, that it was not their responsibility.
Child Labor Advocates Call
Wal-Mart Settlement
Disastrous…
Activists Outraged at Paltry
Fines and Potential for
Future Violations by Nation’s
Largest Retailer
Villagers had complained that the factory.. owned by Fountain Set, had turned their river water dark red. Authorities discovered a pipe buried underneath the factory floor that was dumping roughly 22,000 tons of water contaminated from its
dyeing operations each day into a nearby river, according to local environmental-protection officials.

Gap Inc. was recognized by
Maclean’s Magazine as one of the
Top 50 Most Socially Responsible
Corporations based on an analysis by Jantzi
Research Company.
… “provide practical and compassionate support to women and children in need around the globe
[offering] Free medical, dental and optometric care to children and the elderly in Vietnam..”
“Respect for human rights and fair labor conditions for the people who manufacture our products around the world is the foundation of our company…”
“Our greatest responsibility as a global company is to play a role in bringing about positive systemic change for workers within our own supply chain, and in the industry.”

Environment
Labor
Best Practices

Environment
Labor
Customs
… common interests

“The industry adage that ‘companies chase the lowest-cost needle’ is changing, sourcing experts said. In its place, companies are developing more nuanced strategies that include both enhanced factory productivity and diversified sourcing bases to mitigate rising costs”
“Raw material prices and transportation rates have also soared, and the floundering world economy has further challenged apparel firms by making price increases nearly impossible to pass on. More than moving from country to country, smart manufacturing and sourcing will be the most effective way to combat the rising price of manufacturing.”
- Source: Women’s Wear Daily


Egypt and Israel monitor and enforce the protocol rules

US Customs & Border Protection (CBP) monitors and enforces the US Harmonized
Tariff Schedule (HTS) rules

CBP relies on assurances from the
QIZ committees


Assurances that the factory is designated as a QIZ factory

Bill of materials or other worksheet showing satisfaction of the 35% value requirement

Description of all manufacturing processes, particularly where double substantial transformation will be claimed
Standardized
Documents


Invoices and bills of lading showing cost and movement of materials produced in West Bank,
Gaza Strip, QIZ and Israel and foreign materials

Yarn or fabric affidavits as needed to support
35% value requirement

Production (cutting and sewing) records

All documents should be in English or be prepared to furnish English translations

 Local Value Content Sheet
 Timeline
 Order to Supplier
 Supplier Internal Work Order
 Yarn Purchase Records
 Knitting Records
 Fabric Purchase Records
 Accessories Records
 Cutting Records
 Sewing Records
 Ironing & Packing Records
 Inspection Records

 Timeline
 Local Value Content
 Direct Labor Cost
 Direct Processing Cost
 Final Summary Content Calculation

Gail Strickler
Assistant United States Trade Representative www.ustr.gov
gail_strickler@ustr.eop.gov
(202) 395-7391

 Chinese cotton knit fabric with a cost of $4000 is imported into Israel where it is cut at a cost of $1000
 The cut components are sent to an Egyptian QIZ where they are assembled by sewing into men’s knit polo-style shirts at a cost of $2000 with US buttons and thread with a cost of $200.
 The finished shirts are exported directly to the United States where they are entered with a value of $10,000


Without double substantial transformation, the shirt would not meet the 35 percent value requirement, because the sum of the Israel processing plus the Egypt QIZ processing plus the US buttons and thread is only 32 percent
 But the Chinese fabric is substantially transformed into cut parts in Israel and transformed again into shirts in the QIZ
 With the Chinese fabric, the cost of Israeli materials is
$5000, and the relevant percentage becomes 72 percent, well above the required percentage

 In a 2007 CBP ruling (HQ HO12418), zippers assembled in Israel for use in QIZ garments were not considered substantially transformed and their cost could not be counted toward the 35 percent
 The zipper assembly cost, however, could be counted toward the 35 percent as a cost of processing the garment
 But the packing and freight to move the assembled zippers to the QIZ were not counted because they did not relate to materials produced in the
QIZ or Israel