I

104TH CONGRESS

2D SESSION H. R. 3074

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

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,

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:
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1 ‘‘SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.

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

3 The President is authorized to proclaim elimination or

4 modification of any existing duty as the President deter5 mines is necessary to exempt any article from duty if—

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

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

8 or a qualifying industrial zone or is a new or dif9 ferent article of commerce that has been grown, pro10 duced, or manufactured in the West Bank, the Gaza

11 Strip, or a qualifying industrial zone;

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

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

14 industrial zone; and

15 ‘‘(3) the sum of—

16 ‘‘(A) the cost or value of the materials pro17 duced in the West Bank, the Gaza Strip, Israel,

18 or a qualifying industrial zone, plus

19 ‘‘(B) the direct costs of processing oper20 ations performed in the West Bank, the Gaza

21 Strip, Israel, or a qualifying industrial zone,

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

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

24 States.

25 For purposes of determining the 35 percent content re26 quirement contained in paragraph (3), the cost or value
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1 of materials which are used in the production of an article

2 in the West Bank, the Gaza Strip, or a qualifying indus3 trial zone, and are the products of the United States, may

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

5 value of the article.

6 ‘‘(b) APPLICABILITY OF CERTAIN PROVISIONS OF

7 THE AGREEMENT.—

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

9 shall be considered a new or different article of com10 merce under this section, and no material shall be

11 included for purposes of determining the 35 percent

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

13 merely undergone—

14 ‘‘(A) simple combining or packaging oper15 ations, or

16 ‘‘(B) mere dilution with water or with an17 other substance that does not materially alter

18 the characteristics of the article or material.

19 ‘‘(2) REQUIREMENTS FOR NEW OR DIFFERENT

20 ARTICLE OF COMMERCE.—For purposes of sub21 section (a)(1), an article is a ‘new or different article

22 of commerce’ if it is substantially transformed into

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

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

25 purposes of this section, the cost or value of mate-
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1 rials produced in the West Bank, the Gaza Strip, or

2 a qualifying industrial zone includes—

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

4 materials;

5 ‘‘(ii) when not included in the manufactur6 er’s actual cost for the materials, the freight,

7 insurance, packing, and all other costs incurred

8 in transporting the materials to the manufac9 turer’s plant;

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

11 less the value of recoverable scrap; and

12 ‘‘(iv) taxes or duties imposed on the mate13 rials by the West Bank, the Gaza Strip, or a

14 qualifying industrial zone, if such taxes or du15 ties are not remitted on exportation.

16 ‘‘(B) If a material is provided to the manufac17 turer without charge, or at less than fair market

18 value, its cost or value shall be determined by com19 puting the sum of—

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

21 production, or manufacture of the material, in22 cluding general expenses;

23 ‘‘(ii) an amount for profit; and
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1 ‘‘(iii) freight, insurance, packing, and all

2 other costs incurred in transporting the mate3 rial to the manufacturer’s plant.

4 If the information necessary to compute the cost or

5 value of a material is not available, the Customs

6 Service may ascertain or estimate the value thereof

7 using all reasonable methods.

8 ‘‘(4) DIRECT COSTS OF PROCESSING OPER9 ATIONS.—(A) For purposes of this section, the ‘di10 rect costs of processing operations performed in the

11 West Bank, Gaza Strip, or a qualifying industrial

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

13 directly incurred in, or which can be reasonably allo14 cated to, the growth, production, manufacture, or

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

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

17 are includible in the appraised value of articles im18 ported into the United States:

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

20 growth, production, manufacture, or assembly

21 of the article, including fringe benefits, on-the22 job training, and costs of engineering, super23 visory, quality control, and similar personnel.
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1 ‘‘(ii) Dies, molds, tooling, and depreciation

2 on machinery and equipment which are alloca3 ble to the article.

4 ‘‘(iii) Research, development, design, engi5 neering, and blueprint costs insofar as they are

6 allocable to the article.

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

8 article.

9 ‘‘(B) Those items that are not included as di10 rect costs of processing operations with respect to an

11 article are those which are not directly attributable

12 to the article or are not costs of manufacturing the

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

14 ‘‘(i) profit; and

15 ‘‘(ii) general expenses of doing business

16 which are either not allocable to the article or

17 are not related to the growth, production, man18 ufacture, or assembly of the article, such as ad19 ministrative salaries, casualty and liability in20 surance, advertising, and salesmen’s salaries,

21 commissions, or expenses.

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

23 this section—

24 ‘‘(A) articles are ‘imported directly’ if—
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1 ‘‘(i) the articles are shipped directly

2 from the West Bank, the Gaza Strip, a

3 qualifying industrial zone, or Israel into

4 the United States without passing through

5 the territory of any intermediate country;

6 or

7 ‘‘(ii) if shipment is through the terri8 tory of an intermediate country, the arti9 cles in the shipment do not enter into the

10 commerce of any intermediate country and

11 the invoices, bills of lading, and other ship12 ping documents specify the United States

13 as the final destination; or

14 ‘‘(B) if articles are shipped through an in15 termediate country and the invoices and other

16 documents do not specify the United States as

17 the final destination, then the articles in the

18 shipment, upon arrival in the United States, are

19 imported directly only if they—

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

21 customs authority in an intermediate coun22 try;

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

24 of an intermediate country except for the

25 purpose of a sale other than at retail, but
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1 only if the articles are imported as a result

2 of the original commercial transactions be3 tween the importer and the producer or

4 the producer’s sales agent; and

5 ‘‘(iii) have not been subjected to oper6 ations other than loading, unloading, or

7 other activities necessary to preserve the

8 article in good condition.

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

10 is eligible for the duty exemption under this section

11 only if—

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

13 meets the conditions for the duty exemption;

14 and

15 ‘‘(B) when requested by the Customs Serv16 ice, the importer, manufacturer, or exporter

17 submits a declaration setting forth all pertinent

18 information with respect to the article, includ19 ing the following:

20 ‘‘(i) A description of the article, quan21 tity, numbers, and marks of packages, in22 voice numbers, and bills of lading.

23 ‘‘(ii) A description of the operations

24 performed in the production of the article

25 in the West Bank, the Gaza Strip, a quali-
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1 fying industrial zone, or Israel and identi2 fication of the direct costs of processing

3 operations.

4 ‘‘(iii) A description of any materials

5 used in production of the article which are

6 wholly the growth, product, or manufac7 ture of the West Bank, the Gaza Strip, a

8 qualifying industrial zone, Israel or United

9 States, and a statement as to the cost or

10 value of such materials.

11 ‘‘(iv) A description of the operations

12 performed on, and a statement as to the

13 origin and cost or value of, any foreign

14 materials used in the article which are

15 claimed to have been sufficiently processed

16 in the West Bank, the Gaza Strip, a quali17 fying industrial zone, or Israel so as to be

18 materials produced in the West Bank, the

19 Gaza Strip, a qualifying industrial zone, or

20 Israel.

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

22 cost or value of any foreign materials used

23 in the article which have not been substan24 tially transformed in the West Bank, the

25 Gaza Strip, or a qualifying industrial zone.
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1 ‘‘(c) SHIPMENT OF ARTICLES OF ISRAEL THROUGH

2 WEST BANK OR GAZA STRIP.—The President is author3 ized to proclaim that articles of Israel may be treated as

4 though they were articles directly shipped from Israel for

5 the purposes of the Agreement even if shipped to the Unit6 ed States from the West Bank, the Gaza Strip, or a quali7 fying industrial zone, if the articles otherwise meet the re8 quirements of the Agreement.

9 ‘‘(d) TREATMENT OF COST OR VALUE OF MATE10 RIALS.—The President is authorized to proclaim that the

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

12 Gaza Strip, or a qualifying industrial zone may be in13 cluded in the cost or value of materials produced in Israel

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

15 the direct costs of processing operations performed in the

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

17 may be included in the direct costs of processing oper18 ations performed in Israel under section 1(c)(ii) of Annex

19 3 of the Agreement.

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

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

22 means any area that—

23 ‘‘(1) encompasses portions of the territory of Is24 rael and Jordan or Israel and Egypt;
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1 ‘‘(3) has been designated by local authorities as

2 an enclave where merchandise may enter without

3 payment of duty or excise taxes; and

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

5 qualifying industrial zone.’’.

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