H. R. 3074—2
mining the 35 percent requirement of subsection (a)(3), by
virtue of having merely undergone—
‘‘(A) simple combining or packaging operations, or
‘‘(B) mere dilution with water or with another sub-
stance that does not materially alter the characteristics
of the article or material.
‘‘(2) REQUIREMENTS FOR NEW OR DIFFERENT ARTICLE OF
COMMERCE.—For purposes of subsection (a)(1), an article is
a ‘new or different article of commerce’ if it is substantially
transformed into an article having a new name, character,
or use.
‘‘(3) COST OR VALUE OF MATERIALS.—(A) For purposes of
this section, the cost or value of materials produced in the
West Bank, the Gaza Strip, or a qualifying industrial zone
includes—
‘‘(i) the manufacturer’s actual cost for the materials;
‘‘(ii) when not included in the manufacturer’s actual
cost for the materials, the freight, insurance, packing, and
all other costs incurred in transporting the materials to
the manufacturer’s plant;
‘‘(iii) the actual cost of waste or spoilage, less the
value of recoverable scrap; and
‘‘(iv) taxes or duties imposed on the materials by the
West Bank, the Gaza Strip, or a qualifying industrial zone,
if such taxes or duties are not remitted on exportation.
‘‘(B) If a material is provided to the manufacturer without
charge, or at less than fair market value, its cost or value
shall be determined by computing the sum of—
‘‘(i) all expenses incurred in the growth, production,
or manufacture of the material, including general expenses;
‘‘(ii) an amount for profit; and
‘‘(iii) freight, insurance, packing, and all other costs
incurred in transporting the material to the manufacturer’s
plant.
If the information necessary to compute the cost or value of
a material is not available, the Customs Service may ascertain
or estimate the value thereof using all reasonable methods.
‘‘(4) DIRECT COSTS OF PROCESSING OPERATIONS.—(A) For
purposes of this section, the ‘direct costs of processing oper-
ations performed in the West Bank, Gaza Strip, or a qualifying
industrial zone’ with respect to an article are those costs either
directly incurred in, or which can be reasonably allocated to,
the growth, production, manufacture, or assembly, of that arti-
cle. Such costs include, but are not limited to, the following
to the extent that they are includible in the appraised value
of articles imported into the United States:
‘‘(i) All actual labor costs involved in the growth,
production, manufacture, or assembly of the article, includ-
ing fringe benefits, on-the-job training, and costs of
engineering, supervisory, quality control, and similar
personnel.
‘‘(ii) Dies, molds, tooling, and depreciation on machin-
ery and equipment which are allocable to the article.
‘‘(iii) Research, development, design, engineering, and
blueprint costs insofar as they are allocable to the article.
‘‘(iv) Costs of inspecting and testing the article.
H. R. 3074—3
‘‘(B) Those items that are not included as direct costs
of processing operations with respect to an article are those
which are not directly attributable to the article or are not
costs of manufacturing the article. Such items include, but
are not limited to—
‘‘(i) profit; and
‘‘(ii) general expenses of doing business which are
either not allocable to the article or are not related to
the growth, production, manufacture, or assembly of the
article, such as administrative salaries, casualty and liabil-
ity insurance, advertising, and salesmen’s salaries, commis-
sions, or expenses.
‘‘(5) IMPORTED DIRECTLY.—For purposes of this section—
‘‘(A) articles are ‘imported directly’ if—
‘‘(i) the articles are shipped directly from the West
Bank, the Gaza Strip, a qualifying industrial zone,
or Israel into the United States without passing
through the territory of any intermediate country; or
‘‘(ii) if shipment is through the territory of an
intermediate country, the articles in the shipment do
not enter into the commerce of any intermediate coun-
try and the invoices, bills of lading, and other shipping
documents specify the United States as the final des-
tination; or
‘‘(B) if articles are shipped through an intermediate
country and the invoices and other documents do not
specify the United States as the final destination, then
the articles in the shipment, upon arrival in the United
States, are imported directly only if they—
‘‘(i) remain under the control of the customs
authority in an intermediate country;
‘‘(ii) do not enter into the commerce of an inter-
mediate country except for the purpose of a sale other
than at retail, but only if the articles are imported
as a result of the original commercial transactions
between the importer and the producer or the produc-
er’s sales agent; and
‘‘(iii) have not been subjected to operations other
than loading, unloading, or other activities necessary
to preserve the article in good condition.
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‘‘(6) DOCUMENTATION REQUIRED.—An article is eligible for
the duty exemption under this section only if—
‘‘(A) the importer certifies that the article meets the
conditions for the duty exemption; and
‘‘(B) when requested by the Customs Service, the
importer, manufacturer, or exporter submits a declaration
setting forth all pertinent information with respect to the
article, including the following:
‘‘(i) A description of the article, quantity, numbers,
and marks of packages, invoice numbers, and bills
of lading.
‘‘(ii) A description of the operations performed in
the production of the article in the West Bank, the
Gaza Strip, a qualifying industrial zone, or Israel and
identification of the direct costs of processing oper-
ations.
‘‘(iii) A description of any materials used in produc-
tion of the article which are wholly the growth, product,
or manufacture of the West Bank, the Gaza Strip,
a qualifying industrial zone, Israel or United States,
and a statement as to the cost or value of such mate-
rials.
‘‘(iv) A description of the operations performed on,
and a statement as to the origin and cost or value
of, any foreign materials used in the article which
are claimed to have been sufficiently processed in the
West Bank, the Gaza Strip, a qualifying industrial
zone, or Israel so as to be materials produced in the
West Bank, the Gaza Strip, a qualifying industrial
zone, or Israel.
‘‘(v) A description of the origin and cost or value
of any foreign materials used in the article which have
not been substantially transformed in the West Bank,
the Gaza Strip, or a qualifying industrial zone.
‘‘(c) SHIPMENT OF ARTICLES OF ISRAEL THROUGH WEST BANK
OR GAZA STRIP.—The President is authorized to proclaim that arti-
cles of Israel may be treated as though they were articles directly
shipped from Israel for the purposes of the Agreement even if
shipped to the United States from the West Bank, the Gaza Strip,
or a qualifying industrial zone, if the articles otherwise meet the
requirements of the Agreement.
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‘‘(d) TREATMENT OF COST OR VALUE OF MATERIALS.—The Presi-
dent is authorized to proclaim that the cost or value of materials
produced in the West Bank, the Gaza Strip, or a qualifying indus-
trial zone may be included in the cost or value of materials produced
in Israel under section 1(c)(i) of Annex 3 of the Agreement, and
the direct costs of processing operations performed in the West
Bank, the Gaza Strip, or a qualifying industrial zone may be
included in the direct costs of processing operations performed
in Israel under section 1(c)(ii) of Annex 3 of the Agreement.
‘‘(e) QUALIFYING INDUSTRIAL ZONE DEFINED.—For purposes of
this section, a ‘qualifying industrial zone’ means any area that—
‘‘(1) encompasses portions of the territory of Israel and
Jordan or Israel and Egypt;
‘‘(2) has been designated by local authorities as an enclave
where merchandise may enter without payment of duty or
excise taxes; and
‘‘(3) has been specified by the President as a qualifying
industrial zone.’’.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.