optimizing qiz opportunities in egypt gail strickler assistant united states trade representative
TRANSCRIPT
Optimizing QIZ Optimizing QIZ Opportunities in EgyptOpportunities in Egypt
Gail StricklerAssistant United States Trade Representative
QIZQIZ OverviewOverview
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
US RequirementsUS Requirements 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.
Egypt – Israel Protocol Egypt – Israel Protocol RequirementsRequirements
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.
Participating FactoriesParticipating Factories
QIZ joint committees, comprised of representatives from Egypt and
Israel. Provide lists of QIZ companies whose products are
eligible for QIZ treatment
Accurate factory directories can be
significant marketing tools…
Current lists can be viewed at:http://www.qizegypt.gov.eg/images/attachment.ashx.pdf
How Brands and How Brands and Retailers Find Appropriate Retailers Find Appropriate Sourcing PartnersSourcing Partners
A Good ExampleA Good Example
View by Categories View by Country Search by Name
An Effective DirectoryAn Effective Directory
By Category
An Effective DirectoryAn Effective Directory
By Company or Factory Name
An Effective DirectoryAn Effective Directory
How can I make my product more
accessible to my customers? ….
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?
Successful SuppliersSuccessful Suppliers
What else do you have to do to grow
business with US importers?...
Price
Reliability
Quality
Global InterestsGlobal Interests
… common interests
Labor
Environment
Customs
In the news…In the news…
… “there are cases of labor exploitation and unfair treatment everywhere" the head of Dignity Returns, Boosaba Meechai.
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.
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.
…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 Environ-
ment Police Bureau head
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.
Also in the news…Also in the news…
“Respect for human rights and fair labor conditions for the people who manufacture our products around the world is the foundation of our 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..”
“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.”
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.
Global InterestsGlobal Interests
Best Practices
Labor
Environment
Global InterestsGlobal Interests
… common interests
Labor
Environment
Customs
Opportunities and ChallengesOpportunities and Challenges
“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
EnforcementEnforcement
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
Recordkeeping & DocumentationRecordkeeping & Documentation
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
Recordkeeping & DocumentationRecordkeeping & Documentation
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
Document FlowDocument Flow
Production RecordsProduction Records 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
Tracking Local ValuesTracking Local Values
Timeline
Local Value Content
Direct Labor Cost
Direct Processing Cost
Final Summary Content Calculation
Thank YouThank You
Gail StricklerGail Strickler
Assistant United States Trade Representative
www.ustr.gov
(202) 395-7391
Example…Example… 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
……As a ResultAs a Result 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
Another ExampleAnother Example 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