‘‘(iii) the actual cost of waste or spoilage,
less the value of recoverable scrap; and
‘‘(iv) taxes or duties imposed on the mate-
rials 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 manufac-
turer without charge, or at less than fair market
value, its cost or value shall be determined by com-
puting the sum of—
‘‘(i) all expenses incurred in the growth,
production, or manufacture of the material, in-
cluding 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
OPER-
ATIONS.—(A) For purposes of this section, the ‘direct
costs of processing operations performed in the West
Bank, Gaza Strip, or a qualifying industrial zone’
with respect to an article are those costs either di-
rectly incurred in, or which can be reasonably allo-
cated to, the growth, production, manufacture, or as-
sembly, of that article. Such costs include, but are not
limited to, the following to the extent that they are in-
cludible 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, including fringe benefits, on-the-job
training, and costs of engineering, supervisory,
quality control, and similar personnel.
‘‘(ii) Dies, molds, tooling, and depreciation
on machinery and equipment which are allocable
to the article.
‘‘(iii) Research, development, design, engi-
neering, and blueprint costs insofar as they are
allocable to the article.
‘‘(iv) Costs of inspecting and testing the ar-
ticle.
‘‘(B) Those items that are not included as direct
costs of processing operations with respect to an arti-
cle 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, manu-
facture, or assembly of the article, such as ad-
ministrative salaries, casualty and liability in-
surance, advertising, and salesmen’s salaries,
commissions, 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 terri-
tory of an intermediate country, the articles
in the shipment do not enter into the com-
merce of any intermediate country and the
invoices, bills of lading, and other shipping
documents specify the United States as the
final destination; or
‘‘(B) if articles are shipped through an in-
termediate 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 coun-
try;
‘‘(ii) do not enter into the commerce of
an intermediate country except for the pur-
pose 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 pro-
ducer’s sales agent; and
‘‘(iii) have not been subjected to oper-
ations other than loading, unloading, or
other activities necessary to preserve the ar-
ticle in good condition.
‘‘(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 Serv-
ice, the importer, manufacturer, or exporter sub-
mits a declaration setting forth all pertinent in-
formation with respect to the article, including
the following:
‘‘(i) A description of the article, quan-
tity, numbers, and marks of packages, in-
voice 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 operations.
‘‘(iii) A description of any materials
used in production of the article which are
wholly the growth, product, or manufacture
of the West Bank, the Gaza Strip, a quali-
fying industrial zone, Israel or United
States, and a statement as to the cost or
value of such materials.
‘‘(iv) A description of the operations
performed on, and a statement as to the ori-
gin and cost or value of, any foreign mate-
rials used in the article which are claimed
to have been sufficiently processed in the
West Bank, the Gaza Strip, a qualifying in-
dustrial 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 substan-
tially 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 articles of Israel may be treated as though
they were articles directly shipped from Israel for the pur-
poses of the Agreement even if shipped to the United States
from the West Bank, the Gaza Strip, or a qualifying indus-
trial zone, if the articles otherwise meet the requirements
of the Agreement.
‘‘(d) TREATMENT
OF COST
OR VALUE
OF MATE-
RIALS.—The President is authorized to proclaim that the
cost or value of materials produced in the West Bank, the
Gaza Strip, or a qualifying industrial zone may be in-
cluded 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 per-