IIA

104TH CONGRESS

2D SESSION H. R. 3074

IN THE SENATE OF THE UNITED STATES

APRIL 17, 1996

Received; read twice and referred to the Committee on Finance

AN ACT

To amend the United States-Israel Free Trade Area Implementation Act of 1985 to provide the President with

additional proclamation authority with respect to articles

of the West Bank or Gaza Strip or a qualifying industrial zone.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. ADDITIONAL PROCLAMATION AUTHORITY.

4 The United States-Israel Free Trade Area Implemen5 tation Act of 1985 (19 U.S.C. 2112 note) is amended by

6 adding at the end the following new section:

7 ‘‘SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.

8 ‘‘(a) ELIMINATION OR MODIFICATIONS OF DUTIES.—

9 The President is authorized to proclaim elimination or

10 modification of any existing duty as the President deter11 mines is necessary to exempt any article from duty if—

12 ‘‘(1) that article is wholly the growth, product,

13 or manufacture of the West Bank, the Gaza Strip,

14 or a qualifying industrial zone or is a new or dif15 ferent article of commerce that has been grown, pro16 duced, or manufactured in the West Bank, the Gaza

17 Strip, or a qualifying industrial zone;

18 ‘‘(2) that article is imported directly from the

19 West Bank, the Gaza Strip, Israel, or a qualifying

20 industrial zone; and

21 ‘‘(3) the sum of—

22 ‘‘(A) the cost or value of the materials pro23 duced in the West Bank, the Gaza Strip, Israel,

24 or a qualifying industrial zone, plus
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1 ‘‘(B) the direct costs of processing oper2 ations performed in the West Bank, the Gaza

3 Strip, Israel, or a qualifying industrial zone,

4 is not less than 35 percent of the appraised value of

5 the product at the time it is entered into the United

6 States.

7 For purposes of determining the 35 percent content re8 quirement contained in paragraph (3), the cost or value

9 of materials which are used in the production of an article

10 in the West Bank, the Gaza Strip, or a qualifying indus11 trial zone, and are the products of the United States, may

12 be counted in an amount up to 15 percent of the appraised

13 value of the article.

14 ‘‘(b) APPLICABILITY OF CERTAIN PROVISIONS OF

15 THE AGREEMENT.—

16 ‘‘(1) NONQUALIFYING OPERATIONS.—No article

17 shall be considered a new or different article of com18 merce under this section, and no material shall be

19 included for purposes of determining the 35 percent

20 requirement of subsection (a)(3), by virtue of having

21 merely undergone—

22 ‘‘(A) simple combining or packaging oper23 ations, or
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1 ‘‘(B) mere dilution with water or with an2 other substance that does not materially alter

3 the characteristics of the article or material.

4 ‘‘(2) REQUIREMENTS FOR NEW OR DIFFERENT

5 ARTICLE OF COMMERCE.—For purposes of sub6 section (a)(1), an article is a ‘new or different article

7 of commerce’ if it is substantially transformed into

8 an article having a new name, character, or use.

9 ‘‘(3) COST OR VALUE OF MATERIALS.—(A) For

10 purposes of this section, the cost or value of mate11 rials produced in the West Bank, the Gaza Strip, or

12 a qualifying industrial zone includes—

13 ‘‘(i) the manufacturer’s actual cost for the

14 materials;

15 ‘‘(ii) when not included in the manufactur16 er’s actual cost for the materials, the freight,

17 insurance, packing, and all other costs incurred

18 in transporting the materials to the manufac19 turer’s plant;

20 ‘‘(iii) the actual cost of waste or spoilage,

21 less the value of recoverable scrap; and

22 ‘‘(iv) taxes or duties imposed on the mate23 rials by the West Bank, the Gaza Strip, or a

24 qualifying industrial zone, if such taxes or du25 ties are not remitted on exportation.
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1 ‘‘(B) If a material is provided to the manufac2 turer without charge, or at less than fair market

3 value, its cost or value shall be determined by com4 puting the sum of—

5 ‘‘(i) all expenses incurred in the growth,

6 production, or manufacture of the material, in7 cluding general expenses;

8 ‘‘(ii) an amount for profit; and

9 ‘‘(iii) freight, insurance, packing, and all

10 other costs incurred in transporting the mate11 rial to the manufacturer’s plant.

12 If the information necessary to compute the cost or

13 value of a material is not available, the Customs

14 Service may ascertain or estimate the value thereof

15 using all reasonable methods.

16 ‘‘(4) DIRECT COSTS OF PROCESSING OPER17 ATIONS.—(A) For purposes of this section, the ‘di18 rect costs of processing operations performed in the

19 West Bank, Gaza Strip, or a qualifying industrial

20 zone’ with respect to an article are those costs either

21 directly incurred in, or which can be reasonably allo22 cated to, the growth, production, manufacture, or

23 assembly, of that article. Such costs include, but are

24 not limited to, the following to the extent that they
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1 are includible in the appraised value of articles im2 ported into the United States:

3 ‘‘(i) All actual labor costs involved in the

4 growth, production, manufacture, or assembly

5 of the article, including fringe benefits, on-the6 job training, and costs of engineering, super7 visory, quality control, and similar personnel.

8 ‘‘(ii) Dies, molds, tooling, and depreciation

9 on machinery and equipment which are alloca10 ble to the article.

11 ‘‘(iii) Research, development, design, engi12 neering, and blueprint costs insofar as they are

13 allocable to the article.

14 ‘‘(iv) Costs of inspecting and testing the

15 article.

16 ‘‘(B) Those items that are not included as di17 rect costs of processing operations with respect to an

18 article are those which are not directly attributable

19 to the article or are not costs of manufacturing the

20 article. Such items include, but are not limited to—

21 ‘‘(i) profit; and

22 ‘‘(ii) general expenses of doing business

23 which are either not allocable to the article or

24 are not related to the growth, production, man25 ufacture, or assembly of the article, such as ad-
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1 ministrative salaries, casualty and liability in2 surance, advertising, and salesmen’s salaries,

3 commissions, or expenses.

4 ‘‘(5) IMPORTED DIRECTLY.—For purposes of

5 this section—

6 ‘‘(A) articles are ‘imported directly’ if—

7 ‘‘(i) the articles are shipped directly

8 from the West Bank, the Gaza Strip, a

9 qualifying industrial zone, or Israel into

10 the United States without passing through

11 the territory of any intermediate country;

12 or

13 ‘‘(ii) if shipment is through the terri14 tory of an intermediate country, the arti15 cles in the shipment do not enter into the

16 commerce of any intermediate country and

17 the invoices, bills of lading, and other ship18 ping documents specify the United States

19 as the final destination; or

20 ‘‘(B) if articles are shipped through an in21 termediate country and the invoices and other

22 documents do not specify the United States as

23 the final destination, then the articles in the

24 shipment, upon arrival in the United States, are

25 imported directly only if they—
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1 ‘‘(i) remain under the control of the

2 customs authority in an intermediate coun3 try;

4 ‘‘(ii) do not enter into the commerce

5 of an intermediate country except for the

6 purpose of a sale other than at retail, but

7 only if the articles are imported as a result

8 of the original commercial transactions be9 tween the importer and the producer or

10 the producer’s sales agent; and

11 ‘‘(iii) have not been subjected to oper12 ations other than loading, unloading, or

13 other activities necessary to preserve the

14 article in good condition.

15 ‘‘(6) DOCUMENTATION REQUIRED.—An article

16 is eligible for the duty exemption under this section

17 only if—

18 ‘‘(A) the importer certifies that the article

19 meets the conditions for the duty exemption;

20 and

21 ‘‘(B) when requested by the Customs Serv22 ice, the importer, manufacturer, or exporter

23 submits a declaration setting forth all pertinent

24 information with respect to the article, includ25 ing the following:
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1 ‘‘(i) A description of the article, quan2 tity, numbers, and marks of packages, in3 voice numbers, and bills of lading.

4 ‘‘(ii) A description of the operations

5 performed in the production of the article

6 in the West Bank, the Gaza Strip, a quali7 fying industrial zone, or Israel and identi8 fication of the direct costs of processing

9 operations.

10 ‘‘(iii) A description of any materials

11 used in production of the article which are

12 wholly the growth, product, or manufac13 ture of the West Bank, the Gaza Strip, a

14 qualifying industrial zone, Israel or United

15 States, and a statement as to the cost or

16 value of such materials.

17 ‘‘(iv) A description of the operations

18 performed on, and a statement as to the

19 origin and cost or value of, any foreign

20 materials used in the article which are

21 claimed to have been sufficiently processed

22 in the West Bank, the Gaza Strip, a quali23 fying industrial zone, or Israel so as to be

24 materials produced in the West Bank, the
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1 Gaza Strip, a qualifying industrial zone, or

2 Israel.

3 ‘‘(v) A description of the origin and

4 cost or value of any foreign materials used

5 in the article which have not been substan6 tially transformed in the West Bank, the

7 Gaza Strip, or a qualifying industrial zone.

8 ‘‘(c) SHIPMENT OF ARTICLES OF ISRAEL THROUGH

9 WEST BANK OR GAZA STRIP.—The President is author10 ized to proclaim that articles of Israel may be treated as

11 though they were articles directly shipped from Israel for

12 the purposes of the Agreement even if shipped to the Unit13 ed States from the West Bank, the Gaza Strip, or a quali14 fying industrial zone, if the articles otherwise meet the re15 quirements of the Agreement.

16 ‘‘(d) TREATMENT OF COST OR VALUE OF MATE17 RIALS.—The President is authorized to proclaim that the

18 cost or value of materials produced in the West Bank, the

19 Gaza Strip, or a qualifying industrial zone may be in20 cluded in the cost or value of materials produced in Israel

21 under section 1(c)(i) of Annex 3 of the Agreement, and

22 the direct costs of processing operations performed in the

23 West Bank, the Gaza Strip, or a qualifying industrial zone

24 may be included in the direct costs of processing oper-
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1 ations performed in Israel under section 1(c)(ii) of Annex

2 3 of the Agreement.

3 ‘‘(e) QUALIFYING INDUSTRIAL ZONE DEFINED.—

4 For purposes of this section, a ‘qualifying industrial zone’

5 means any area that—

6 ‘‘(1) encompasses portions of the territory of Is7 rael and Jordan or Israel and Egypt;

8 ‘‘(2) has been designated by local authorities as

9 an enclave where merchandise may enter without

10 payment of duty or excise taxes; and

11 ‘‘(3) has been specified by the President as a

12 qualifying industrial zone.’’.

Passed the House of Representatives April 16, 1996.

Attest: ROBIN H. CARLE,

Clerk.