Calendar No. 404
104TH CONGRESS
2D SESSION
H. R. 3074
[Report No. 104–270]
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.
MAY 13, 1996
Reported with an amendment and an amendment to the
title
II
Calendar No. 404
104TH CONGRESS
2D SESSION
H. R. 3074
[Report No. 104–270]
IN THE SENATE OF THE UNITED STATES
APRIL 17, 1996
Received; read twice and referred to the Committee on Finance
MAY 13, 1996
Reported by Mr. ROTH, with an amendment and an amendment to the title
[Strike out all after the enacting clause and insert the part printed in italic]
AN ACT
To amend the United States-Israel Free Trade Area Imple-
mentation 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 indus-
trial zone.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ADDITIONAL PROCLAMATION AUTHORITY.
The United States-Israel Free Trade Area Implemen-
tation Act of 1985 (19 U.S.C. 2112 note) is amended by
adding at the end the following new section:
‘‘SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.
‘‘(a) ELIMINATION OR MODIFICATIONS OF DUTIES.—
The President is authorized to proclaim elimination or
modification of any existing duty as the President deter-
mines is necessary to exempt any article from duty if—
‘‘(1) that article is wholly the growth, product,
or manufacture of the West Bank, the Gaza Strip,
or a qualifying industrial zone or is a new or dif-
ferent article of commerce that has been grown, pro-
duced, or manufactured in the West Bank, the Gaza
Strip, or a qualifying industrial zone;
‘‘(2) that article is imported directly from the
West Bank, the Gaza Strip, Israel, or a qualifying
industrial zone; and
‘‘(3) the sum of—
‘‘(A) the cost or value of the materials pro-
duced in the West Bank, the Gaza Strip, Israel,
or a qualifying industrial zone, plus
‘‘(B) the direct costs of processing oper-
ations performed in the West Bank, the Gaza
Strip, Israel, or a qualifying industrial zone,
is not less than 35 percent of the appraised value of
the product at the time it is entered into the United
States.
For purposes of determining the 35 percent content re-
quirement contained in paragraph (3), the cost or value
of materials which are used in the production of an article
in the West Bank, the Gaza Strip, or a qualifying indus-
trial zone, and are the products of the United States, may
be counted in an amount up to 15 percent of the appraised
value of the article.
‘‘(b) APPLICABILITY
OF CERTAIN PROVISIONS
OF
THE AGREEMENT.—
‘‘(1) NONQUALIFYING OPERATIONS.—No article
shall be considered a new or different article of com-
merce under this section, and no material shall be
included for purposes of determining the 35 percent
requirement of subsection (a)(3), by virtue of having
merely undergone—
‘‘(A) simple combining or packaging oper-
ations, or
‘‘(B) mere dilution with water or with an-
other substance that does not materially alter
the characteristics of the article or material.
‘‘(2) REQUIREMENTS FOR NEW OR DIFFERENT
ARTICLE
OF
COMMERCE.—For purposes of sub-
section (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 mate-
rials 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 manufactur-
er’s actual cost for the materials, the freight,
insurance, packing, and all other costs incurred
in transporting the materials to the manufac-
turer’s plant;
‘‘(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 du-
ties 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 mate-
rial 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 ‘di-
rect 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
directly incurred in, or which can be reasonably allo-
cated to, the growth, production, manufacture, or
assembly, of that article. Such costs include, but are
not limited to, the following to the extent that they
are includible in the appraised value of articles im-
ported 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, super-
visory, quality control, and similar personnel.
‘‘(ii) Dies, molds, tooling, and depreciation
on machinery and equipment which are alloca-
ble 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
article.
‘‘(B) Those items that are not included as di-
rect 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, man-
ufacture, 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 arti-
cles in the shipment do not enter into the
commerce of any intermediate country and
the invoices, bills of lading, and other ship-
ping 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
purpose of a sale other than at retail, but
fying industrial zone, or Israel and identi-
fication 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 manufac-
ture 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 materials.
‘‘(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 quali-
fying 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 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 author-
ized to proclaim that articles 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 Unit-
ed States from the West Bank, the Gaza Strip, or a quali-
fying industrial zone, if the articles otherwise meet the re-
quirements 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 oper-
ations 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 Is-
rael 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.’’.
SECTION 1. TABLE OF CONTENTS.
The table of contents is as follows:
Sec. 1. Table of contents.
TITLE I—EXTENSION OF FREE TRADE TO WEST BANK AND GAZA
Sec. 101. Additional proclamation authority.
TITLE II—APPROVAL AND IMPLEMENTATION OF OECD
SHIPBUILDING AGREEMENT
Subtitle A—General Provisions
Sec. 201. Short title.
Sec. 202. Approval of the Shipbuilding Agreement.
Sec. 203. Injurious pricing and countermeasures relating to shipbuilding.
Sec. 204. Enforcement of countermeasures.
Sec. 205. Judicial review in injurious pricing and countermeasure proceedings.
Subtitle B—Other Provisions
Sec. 211. Equipment and repair of vessels.
Sec. 212. Effect of agreement with respect to private remedies.
Sec. 213. Implementing regulations.
Sec. 214. Amendments to the Merchant Marine Act, 1936.
Subtitle C—Effective Date
Sec. 221. Effective date.
TITLE III—GENERALIZED SYSTEM OF PREFERENCES
Sec. 301. Short title.
Sec. 302. Generalized system of preferences.
Sec. 303. Effective date.
Sec. 304. Conforming amendments.
TITLE IV—REVENUE OFFSETS
Sec. 400. Amendment of 1986 Code.
Subtitle A—Foreign Trust Tax Compliance
Sec. 401. Improved information reporting on foreign trusts.
Sec. 402. Comparable penalties for failure to file return relating to transfers to
foreign entities.
Sec. 403. Modifications of rules relating to foreign trusts having one or more
United States beneficiaries.
Sec. 404. Foreign persons not to be treated as owners under grantor trust rules.
Sec. 405. Information reporting regarding foreign gifts.
Sec. 406. Modification of rules relating to foreign trusts which are not grantor
trusts.
Sec. 407. Residence of trusts, etc.
Subtitle B—International Shipping Income Disclosure
Sec. 411. Penalties for failure to disclose position that certain international ship-
ping income is not includible in gross income.
TITLE I—EXTENSION OF FREE
TRADE TO WEST BANK AND
GAZA
SEC. 101. ADDITIONAL PROCLAMATION AUTHORITY.
The United States-Israel Free Trade Area Implemen-
tation Act of 1985 (19 U.S.C. 2112 note) is amended by
adding at the end the following new section:
‘‘SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.
‘‘(a) ELIMINATION OR MODIFICATIONS OF DUTIES.—
The President is authorized to proclaim elimination or
modification of any existing duty as the President deter-
mines is necessary to exempt any article from duty if—
‘‘(1) that article is wholly the growth, product,
or manufacture of the West Bank, the Gaza Strip, or
a qualifying industrial zone or is a new or different
article of commerce that has been grown, produced, or
manufactured in the West Bank, the Gaza Strip, or
a qualifying industrial zone;
‘‘(2) that article is imported directly from the
West Bank, the Gaza Strip, Israel, or a qualifying in-
dustrial zone; and
‘‘(3) the sum of—
‘‘(A) the cost or value of the materials pro-
duced in the West Bank, the Gaza Strip, Israel,
or a qualifying industrial zone, plus
‘‘(B) the direct costs of processing oper-
ations performed in the West Bank, the Gaza
Strip, Israel, or a qualifying industrial zone,
is not less than 35 percent of the appraised value of
the product at the time it is entered into the United
States.
For purposes of determining the 35 percent content require-
ment contained in paragraph (3), the cost or value of mate-
rials which are used in the production of an article in the
West Bank, the Gaza Strip, or a qualifying industrial zone,
and are the products of the United States, may be counted
in an amount up to 15 percent of the appraised value of
the article.
‘‘(b) APPLICABILITY OF CERTAIN PROVISIONS OF THE
AGREEMENT.—
‘‘(1) NONQUALIFYING
OPERATIONS.—No article
shall be considered a new or different article of com-
merce under this section, and no material shall be in-
cluded for purposes of determining the 35 percent re-
quirement of subsection (a)(3), by virtue of having
merely undergone—
‘‘(A) simple combining or packaging oper-
ations, or
‘‘(B) mere dilution with water or with an-
other substance 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 com-
merce’ if it is substantially transformed into an arti-
cle 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 manufactur-
er’s actual cost for the materials, the freight, in-
surance, packing, and all other costs incurred in
transporting the materials to the manufacturer’s
plant;
‘‘(c) ALTERNATE EQUIVALENT REMEDY.—The criteria
set forth in subparagraphs (A) through (D) of section
806(e)(1) shall apply to any agreement that forms the basis
for termination of an investigation under subsection (a) or
(b).
‘‘(d) PROCEEDINGS BY WTO MEMBERS.—
‘‘(1) SUSPENSION OF INVESTIGATION.—The ad-
ministering authority and the Commission shall sus-
pend an investigation under this section if a WTO
member that is not a Shipbuilding Agreement Party
initiates an antidumping proceeding described in sec-
tion 861(30)(A) with respect to the sale of the subject
vessel.
‘‘(2) TERMINATION
OF
INVESTIGATION.—If an
antidumping proceeding described in paragraph (1)
is concluded by—
‘‘(A) the imposition of antidumping meas-
ures, or
‘‘(B) a negative determination with respect
to whether the sale is at less than fair value or
with respect to injury,
the administering authority and the Commission
shall terminate the investigation under this section.
‘‘(3) CONTINUATION OF INVESTIGATION.—(A) If
such a proceeding—
‘‘(i) is concluded by a result other than a
result described in paragraph (2), or
‘‘(ii) is not concluded within one year from
the date of the initiation of the proceeding,
then the administering authority and the Commission
shall terminate the suspension and continue the inves-
tigation. The period in which the investigation was
suspended shall not be included in calculating dead-
lines applicable with respect to the investigation.
‘‘(B) Notwithstanding subparagraph (A)(ii), if
the proceeding is concluded by a result described in
paragraph (2)(A), the administering authority and
the Commission shall terminate the investigation
under this section.
‘‘SEC. 805. FINAL DETERMINATIONS.
‘‘(a) DETERMINATIONS BY ADMINISTERING AUTHOR-
ITY.—
‘‘(1) IN
GENERAL.—Within 75 days after the
date of its preliminary determination under section
803(b), the administering authority shall make a
final determination of whether the vessel which is the
subject of the investigation has been sold in the Unit-
ed States at less than its fair value.
‘‘(2) EXTENSION OF PERIOD FOR DETERMINA-
TION.—