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Union Calendar No. 237

104TH CONGRESS

2D SESSION H. R. 3074

[Report No. 104–495]

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.

IN THE HOUSE OF REPRESENTATIVES

MARCH 13, 1996

Mr. CRANE (for himself, Mr. SHAW, and Mr. RANGEL) introduced the

following bill; which was referred to the Committee on Ways and Means

MARCH 25, 1996

Committed to the Committee of the Whole House on the State of the Union

and ordered to be printed

A BILL

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. ADDITIONAL PROCLAMATION AUTHORITY.

2 The United States-Israel Free Trade Area Implemen3 tation Act of 1985 (19 U.S.C. 2112 note) is amended by

4 adding at the end the following new section:

5 ‘‘SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.

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

7 The President is authorized to proclaim elimination or

8 modification of any existing duty as the President deter9 mines is necessary to exempt any article from duty if—

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

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

12 or a qualifying industrial zone or is a new or dif13 ferent article of commerce that has been grown, pro14 duced, or manufactured in the West Bank, the Gaza

15 Strip, or a qualifying industrial zone;

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

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

18 industrial zone; and

19 ‘‘(3) the sum of—

20 ‘‘(A) the cost or value of the materials pro21 duced in the West Bank, the Gaza Strip, Israel,

22 or a qualifying industrial zone, plus

23 ‘‘(B) the direct costs of processing oper24 ations performed in the West Bank, the Gaza

25 Strip, Israel, or a qualifying industrial zone,
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1 is not less than 35 percent of the appraised value of

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

3 States.

4 For purposes of determining the 35 percent content re5 quirement contained in paragraph (3), the cost or value

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

7 in the West Bank, the Gaza Strip, or a qualifying indus8 trial zone, and are the products of the United States, may

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

10 value of the article.

11 ‘‘(b) APPLICABILITY OF CERTAIN PROVISIONS OF

12 THE AGREEMENT.—

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

14 shall be considered a new or different article of com15 merce under this section, and no material shall be

16 included for purposes of determining the 35 percent

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

18 merely undergone—

19 ‘‘(A) simple combining or packaging oper20 ations, or

21 ‘‘(B) mere dilution with water or with an22 other substance that does not materially alter

23 the characteristics of the article or material.

24 ‘‘(2) REQUIREMENTS FOR NEW OR DIFFERENT

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

2 of commerce’ if it is substantially transformed into

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

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

5 purposes of this section, the cost or value of mate6 rials produced in the West Bank, the Gaza Strip, or

7 a qualifying industrial zone includes—

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

9 materials;

10 ‘‘(ii) when not included in the manufactur11 er’s actual cost for the materials, the freight,

12 insurance, packing, and all other costs incurred

13 in transporting the materials to the manufac14 turer’s plant;

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

16 less the value of recoverable scrap; and

17 ‘‘(iv) taxes or duties imposed on the mate18 rials by the West Bank, the Gaza Strip, or a

19 qualifying industrial zone, if such taxes or du20 ties are not remitted on exportation.

21 ‘‘(B) If a material is provided to the manufac22 turer without charge, or at less than fair market

23 value, its cost or value shall be determined by com24 puting the sum of—
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1 ‘‘(i) all expenses incurred in the growth,

2 production, or manufacture of the material, in3 cluding general expenses;

4 ‘‘(ii) an amount for profit; and

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

6 other costs incurred in transporting the mate7 rial to the manufacturer’s plant.

8 If the information necessary to compute the cost or

9 value of a material is not available, the Customs

10 Service may ascertain or estimate the value thereof

11 using all reasonable methods.

12 ‘‘(4) DIRECT COSTS OF PROCESSING OPER13 ATIONS.—(A) For purposes of this section, the ‘di14 rect costs of processing operations performed in the

15 West Bank, Gaza Strip, or a qualifying industrial

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

17 directly incurred in, or which can be reasonably allo18 cated to, the growth, production, manufacture, or

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

20 not limited to, the following to the extent that they

21 are includible in the appraised value of articles im22 ported into the United States:

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

24 growth, production, manufacture, or assembly

25 of the article, including fringe benefits, on-the-
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1 job training, and costs of engineering, super2 visory, quality control, and similar personnel.

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

4 on machinery and equipment which are alloca5 ble to the article.

6 ‘‘(iii) Research, development, design, engi7 neering, and blueprint costs insofar as they are

8 allocable to the article.

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

10 article.

11 ‘‘(B) Those items that are not included as di12 rect costs of processing operations with respect to an

13 article are those which are not directly attributable

14 to the article or are not costs of manufacturing the

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

16 ‘‘(i) profit; and

17 ‘‘(ii) general expenses of doing business

18 which are either not allocable to the article or

19 are not related to the growth, production, man20 ufacture, or assembly of the article, such as ad21 ministrative salaries, casualty and liability in22 surance, advertising, and salesmen’s salaries,

23 commissions, or expenses.

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

25 this section—
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1 ‘‘(A) articles are ‘imported directly’ if—

2 ‘‘(i) the articles are shipped directly

3 from the West Bank, the Gaza Strip, a

4 qualifying industrial zone, or Israel into

5 the United States without passing through

6 the territory of any intermediate country;

7 or

8 ‘‘(ii) if shipment is through the terri9 tory of an intermediate country, the arti10 cles in the shipment do not enter into the

11 commerce of any intermediate country and

12 the invoices, bills of lading, and other ship13 ping documents specify the United States

14 as the final destination; or

15 ‘‘(B) if articles are shipped through an in16 termediate country and the invoices and other

17 documents do not specify the United States as

18 the final destination, then the articles in the

19 shipment, upon arrival in the United States, are

20 imported directly only if they—

21 ‘‘(i) remain under the control of the

22 customs authority in an intermediate coun23 try;

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

25 of an intermediate country except for the
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1 purpose of a sale other than at retail, but

2 only if the articles are imported as a result

3 of the original commercial transactions be4 tween the importer and the producer or

5 the producer’s sales agent; and

6 ‘‘(iii) have not been subjected to oper7 ations other than loading, unloading, or

8 other activities necessary to preserve the

9 article in good condition.

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

11 is eligible for the duty exemption under this section

12 only if—

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

14 meets the conditions for the duty exemption;

15 and

16 ‘‘(B) when requested by the Customs Serv17 ice, the importer, manufacturer, or exporter

18 submits a declaration setting forth all pertinent

19 information with respect to the article, includ20 ing the following:

21 ‘‘(i) A description of the article, quan22 tity, numbers, and marks of packages, in23 voice numbers, and bills of lading.

24 ‘‘(ii) A description of the operations

25 performed in the production of the article
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1 in the West Bank, the Gaza Strip, a quali2 fying industrial zone, or Israel and identi3 fication of the direct costs of processing

4 operations.

5 ‘‘(iii) A description of any materials

6 used in production of the article which are

7 wholly the growth, product, or manufac8 ture of the West Bank, the Gaza Strip, a

9 qualifying industrial zone, Israel or United

10 States, and a statement as to the cost or

11 value of such materials.

12 ‘‘(iv) A description of the operations

13 performed on, and a statement as to the

14 origin and cost or value of, any foreign

15 materials used in the article which are

16 claimed to have been sufficiently processed

17 in the West Bank, the Gaza Strip, a quali18 fying industrial zone, or Israel so as to be

19 materials produced in the West Bank, the

20 Gaza Strip, a qualifying industrial zone, or

21 Israel.

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

23 cost or value of any foreign materials used

24 in the article which have not been substan-
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1 tially transformed in the West Bank, the

2 Gaza Strip, or a qualifying industrial zone.

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

4 WEST BANK OR GAZA STRIP.—The President is author5 ized to proclaim that articles of Israel may be treated as

6 though they were articles directly shipped from Israel for

7 the purposes of the Agreement even if shipped to the Unit8 ed States from the West Bank, the Gaza Strip, or a quali9 fying industrial zone, if the articles otherwise meet the re10 quirements of the Agreement.

11 ‘‘(d) TREATMENT OF COST OR VALUE OF MATE12 RIALS.—The President is authorized to proclaim that the

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

14 Gaza Strip, or a qualifying industrial zone may be in15 cluded in the cost or value of materials produced in Israel

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

17 the direct costs of processing operations performed in the

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

19 may be included in the direct costs of processing oper20 ations performed in Israel under section 1(c)(ii) of Annex

21 3 of the Agreement.

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

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

24 means any area that—
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1 ‘‘(1) encompasses portions of the territory of Is2 rael and Jordan or Israel and Egypt;

3 ‘‘(3) has been designated by local authorities as

4 an enclave where merchandise may enter without

5 payment of duty or excise taxes; and

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

7 qualifying industrial zone.’’.

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