optimizing qiz opportunities in egypt gail strickler assistant united states trade representative

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Optimizing QIZ Optimizing QIZ Opportunities in Egypt Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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Page 1: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Optimizing QIZ Optimizing QIZ Opportunities in EgyptOpportunities in Egypt

Gail StricklerAssistant United States Trade Representative

Page 2: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant 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

Page 3: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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.

Page 4: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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.

Page 5: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 6: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

How Brands and How Brands and Retailers Find Appropriate Retailers Find Appropriate Sourcing PartnersSourcing Partners

Page 7: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

A Good ExampleA Good Example

View by Categories View by Country Search by Name

Page 8: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

An Effective DirectoryAn Effective Directory

By Category

Page 9: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

An Effective DirectoryAn Effective Directory

By Company or Factory Name

Page 10: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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?

Page 11: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Successful SuppliersSuccessful Suppliers

What else do you have to do to grow

business with US importers?...

Price

Reliability

Quality

Page 12: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Global InterestsGlobal Interests

… common interests

Labor

Environment

Customs

Page 13: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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.

Page 14: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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.

Page 15: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Global InterestsGlobal Interests

Best Practices

Labor

Environment

Page 16: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Global InterestsGlobal Interests

… common interests

Labor

Environment

Customs

Page 17: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 18: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 19: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 20: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 21: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Document FlowDocument Flow

Page 22: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 23: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Tracking Local ValuesTracking Local Values

Timeline

Local Value Content

Direct Labor Cost

Direct Processing Cost

Final Summary Content Calculation

Page 24: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative
Page 25: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative
Page 26: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative
Page 27: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative
Page 28: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative
Page 29: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative
Page 30: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

Thank YouThank You

Gail StricklerGail Strickler

Assistant United States Trade Representative

www.ustr.gov

[email protected]

(202) 395-7391

Page 31: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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

Page 32: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

……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

Page 33: Optimizing QIZ Opportunities in Egypt Gail Strickler Assistant United States Trade Representative

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