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.

SECTION 1. ADDITIONAL PROCLAMATION AUTHORITY.

    The United States-Israel Free Trade Area Implementation 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 determines 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 industrial zone; and
        ``(3) the sum of--
            ``(A) the cost or value of the materials produced in the 
        West Bank, the Gaza Strip, Israel, or a qualifying industrial 
        zone, plus
            ``(B) the direct costs of processing operations 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 requirement 
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 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 commerce 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 operations, or
            ``(B) mere dilution with water or with another 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 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 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 allocated 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 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, engineering, 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 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 liability insurance, 
        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 territory of an 
            intermediate country, the articles in the shipment do not 
            enter into the commerce 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 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 
            intermediate 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 producer'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.
        ``(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 articlein 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 
            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 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 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 United 
States from the West Bank, the Gaza Strip, or a qualifying industrial 
zone, if the articles otherwise meet the requirements of the Agreement.
    ``(d) Treatment of Cost or Value of Materials.--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 
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.

Summary: Amends the United States-Israel Free Trade Area Implementation Act of 1985 to authorize the President to proclaim the elimination or modification of any existing duty in order to exempt any article from duty if:  (1) the article is wholly the growth, product, or manufacture of the West Bank, the Gaza Strip, or a qualifying industrial zone (defined under this Act); (2) the article is imported directly from such area or zone; and (3) the sum of the materials and processing costs of such article is not less than 35 percent of the appraised value of such product at the time it enters into the United States. 
Makes an article eligible for such exemption only if:  (1) its importer certifies that the article meets the exemption conditions; and (2) when requested by the Customs Service, the importer, manufacturer, or exporter submits a declaration setting forth all pertinent information with respect to such article and the requirements of this Act. 
Authorizes the President to:  (1) treat such articles as items of Israel for purposes of the free trade agreement entered into between the United States and Israel in 1985, as long as such articles otherwise meet agreement requirements; and (2) include the value of materials and processing costs of such articles as values and costs under such agreement.