Qualifing Industrial Zones (QIZ) Protocol September 2010
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1 Qualifing Industrial Zones (QIZ) Protocol September
2 NY Historical Background QIZ was first introduced in 1996, when the U.S. President, aiming at reinforcing peace in the Middle East, issued proclamation 6955, It authorizes duty-free entry into the U.S. for the industrial products manufactured jointly with Israel and originated in Israel s Arab neighboring country; In 1999, Jordan reached a protocol to enforce decree The ian Protocol was signed in 14 December Page 1
3 NY QIZ Chronicle of Events Dec 14, 2004 Protocol Signed Feb 16, 2005 Oct 21, 2005 Nov.16, 2005 Jan. 15, 2009 Protocol Ratified USTR approved 1 st expansion of the QIZ coverage. 1 st. Expansion ratified. USTR approved 2 nd expansion of the QIZ coverage Negotiations on further expansions. Page 2
4 NY What are Qualified Industrial Zones (QIZs)? Geographically designated industrial areas in selected by the ian government and approved by the U.S. government. Factories located within those areas are granted custom-free access to the USA. Products must comply with rules of origins stipulated in the agreement (including an 10.5% Israeli content). Further areas may be added at the approval of the US government. Page 3
5 NY Geographic Coverage Area - Greater Cairo: Giza, Shubra Al Kheima, Nasr City, 10th Ramadan City, 15th May City, Badr City,6th October City, Obour City, Kalyoub City and The industrial Area in Gesr El Suez. - Alexandria. - Suez Canal Area includes: Port Said, Ismailia, Suez. - Middle Delta includes governorates : Gharbia, Dakahlya, Monofia, Damietta. Page 4
6 NY QIZ Locations Dec 04 Oct 05 Page 5
7 NY QIZ Custom-Free Eligibility Criteria Product must meet the value content requirements of 35%. The sum of materials and direct costs of processing in qualifying industrial zone and Israel must exceed 35% of the finished product s value (ex factory price). QIZ factories and Israeli side each contribute and maintain at least one third (10.5%) of the minimum 35% of local content required, on a quarterly basis. Product must be exported to the US directly from QIZ. Page 6
8 NY Main QIZ Processes A Company, located in a Qualifying Industrial Zone, will register with the QIZ unit. A QIZ certificate is issued to the company upon approval of the Joint Committee. QIZ Exported Goods to the USA enjoy customfree access. audits compliance of companies to rules of the protocol. Page 7
9 NY Registration Overlook Companies interested in becoming a qualified company shall register through the Electronic Government Website, in order to issue a certificate that indicates it is a qualified company,using the following link: Then choose sign up for an account, for first time companies: - Fill out QIZ sign form. - Account Activation. - Continue Registration form. -Submit data. - Fax supporting documents. Page 8 Page 8
10 NY Compliance Enforcement- 1/2 The checks the following: The factories registered for QIZ certification are located within QIZ coverage. On a quarterly basis, certified factories have to purchase Israeli content worth 10.5% of their exported value of the USA. Export data from ian Customs is used to verify proper reporting of all QIZ exports. The Israeli Ministry of Trade verifies the validity of the Israeli invoices. The findings/recommendations are passed to the Joint Committee for their decision. Non-complying factories are removed from the list of certified factories provided to the US Customs Page 9
11 NY Compliance Enforcement- 2/2 The USA Customs enforces compliance to the 35% (Israel-USA FTA): Companies are required to maintain production records regarding cutting/sewing, and records regarding fabric and accessories procured. US Customs Textile Production Verification Team (TPVT) conducts annual visit to selected factories to verify compliance. During the visit the team visits the factories, inspect the records for selected invoices, and tour the factories to verify that the factories complied with the rules of the origin for the exported products (presented invoices). Based on the finding of the TPVT visits or the requested production records for inspected shipments, the US Customs may detain future shipments from certain factories. Page 10
12 Companies Register Ministry of Trade & NY Progress Page 11
13 NY Location Distribution of listed companies by location Freq. Alexandria th of Ramadan 148 Shoubra El Kheima 92 Port Said 55 Nasr City 44 Other Cairo Area 41 Gharbeyya Govr. 34 6th of October 26 Ismailia 26 South Giza 21 Monofeya Govr. 16 El Obour 19 15th May 12 Kalioub 16 Gesr Suez 10 Giza 12 Suez 7 Dakahleyya Govr. 4 Badr City 5 Damietta Govr. 2 Grand Total 788 Page 12
14 NY Distribution of listed companies by labor (total no. of workers) & export situation Worker.Category Freq. More than Less than N.A 28 Grand Total 788 export situation Freq. No 617 Yes 171 Grand Total 788 Page 13
15 NY Distribution of listed companies by sector Page 14
16 NY Distribution of listed companies by Capital & Investment (EGP) Page 15
17 NY QIZ protocol is considered the most generous US-granted preferential agreement ian QIZ protocol is considered the most generous preferential agreement the US has granted to any country in the world thanks to its simple Rules of Origin which only requires a minimum 35% local value added (same general rules of origin of the Israel-USA FTA) of the finished product s value. US importers saved duties on more than $3 billion worth of Apparels from during the past couple of years. Despite the slowdown of the US economy that resulted in diminishing US apparel imports from all main supplier countries, only China and scored positive growth during Page 16
18 NY Export & Import Progress Page 17
19 NY QIZ EXPORTS Page 18
20 NY QIZ Exports by Products Page 19
21 NY Top 10 US Buyers (1) GAP INC. (2) LEVI STRAUSS & CO. (3) WALMART STORES INC. (4) VF EJANSWEAR LIMITED PARTNERSHIP (5) GLORIA (6) JONES APPAREL OF TEXAS (7) TARGET STORES (8) PHILIPS VAN HEUSEN (9) WARNACO INC. (10) CALVIN KLEIN Page 20
22 NY US Buyers/ Brands $50 mil.+ Other important brands Page 21
23 NY Main rankings Thanks to the QIZ Protocol, is currently (2009): 4th largest supplier of Blue Denim Apparel to the US Market. 8th largest supplier of Cotton Pants to the US Market 9th largest supplier of Man-made Fiber Sweaters to the US Market. 10th largest supplier of Man-made Fiber Trousers to the US Market. 13th largest supplier of Dressing Gowns to the US Market. 13th largest supplier of Non-Knit Blouses to the US Market. 14th largest supplier of Man-made Fiber Shirts to the US Market. 14th largest supplier of Skirts to the US Market. 3rd largest supplier of Man- Made Rugs to the US Market. 4th largest supplier of Shop Towels to the US Market. 10th largest supplier of Dish Towels to the US Market. 8th largest supplier of Man-made Curtains to the US Market. 8th largest supplier of Man-made Sheets to the US Market. Page 22
24 NY 10.5% Israeli Content Imports Page 23
25 Imports from Israel by Ministry of Trade & NY Products Page 24
26 NY The Market Access EFTA EU - Turkey FTA USA: QIZ COMESA Page 25
27 NY is and Excellent Migration Destination Competitive advantages of operating from. Low costs (Labor cost, utilities, and space). New reforms will drastically benefit the general business climate. Access to major markets base Support for training of workforce. : excellent investment opportunities! Page 26
28 NY International Production Country Competitive Factors Cost Comparison* 2009 India 2009 Turkey 2009 Italy 2009 Jordan 2009 Water/M³ Electricity/KWH Natural gas/m³ Labor Cost (Euro/Hr) offers very competitive operating costs * Source: IDA 2009 Page 27
29 NY Impact of QIZ on QIZ is credited for keeping the apparel export levels around same levels in QIZ = Survival of Apparel Exporters Positive Indications of future impact are: Expansion in capacity of all major players Major players exploring sourcing options from QIZ FDI in Textile/Apparel Page 28
30 NY Thank you Commercial Office 10 Rockefeller Plaza, New York, NY Tel.: (212) Economic & Commercial Office 2232 Massachusetts Ave NW, Tel.: (202) L Ministry of Trade and Page 29
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